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THE 



Street Railways 



of 



Chicago 



REPORT OF THE 

CIVIC FEDERATION OF CHICAGO 



EDITED BY 

MILO ROY MALTBIE, PR D. 



accountant's report by 
EDMUND F. BARD, C. ACCT. 



REPRINTED FROM 

MUNICIPAL AFFAIRS, 

19QL 






t* 



Copyright 1901, by the Reform Club Committee on City Affairs, 

New York. 



*" Exchange. 

2a f 'oo 



The Civic Federation ot GMGaoo, 

215-216 FIRST NATIONAL BANK BLDG. 



LA VERNE W. NOYES, President. 

JOHN W. ELA, First Vice-President. 

E. G. HALLE, Second Vice-President. 

WILLIAM HORACE BROWN, Secretary. 
ISAAC N. PERRY, Treasurer, 



EXECUTIVE COMMITTEE. 



Franklin H. Head 
Franklin Mac Veagh 
E. G. Keith 
Josiah L. Lombard 
Wm. A. Giles 
Adolph Nathan 
R. T. Crane 
Paul O. Stensland 
Adolph Moses 

Sarah Hackett Stevenson 
Newton A. Partridge 



Charles G. Dubois 
Sigmund Zeisler 
A. M. Barnhart 
H. S. Mecartney 
Hannah G. Solomon 
Wm. R. Harper 
Thos. C. Mac Millan 
E. M. Ashcraft 

Robert McMurdy 

James W. MorrissoEL 

AND THE OFFICERS. 



STREET RAILWAY FRANCHISE COMMITTEE. 

Josiah L. Lombard, Chairman William A. Giles 

Franklin H. Head Edmund J. James 

John W. Ela Adolph Nathan 

James L. Houghteling Edwin Burritt Smith 

John H. Gray Sigmund Zeisler 

Zina R. Carter 

ON INVESTIGATION. 

Adolph Nathan 

Newton A. Partridge 
John H. Gray 



Newton A. Partridge 



SUB-COMMITTEE 

William A. Giles, Chairman 
Josiah L. Lombard 

Edwin Burritt Smith 



CONTENTS. 



PAGE. 

REPORT OF COMMITTEE, 5 

ANALYSIS OF FINANCIAL OPERATIONS, 

Milo Roy Maltbie 7 

ACCOUNTANT'S REPORT, - - - Edmund F. Bard 50 

Exhibit I. — Chicago City Railway Co., ... 50 

Exhibit II. — North Chicago City Railway Co., 84 

Exhibit III. — North Chicago Street Railroad Co., - 100 

Exhibit IV. — Chicago Passenger Railway Co.,. - - 114 

Exhibit V. — Chicago West Division Railway Co., - 123 

Exhibit VI. — West Chicago Street Railroad Co., - - 128 



STREET RAILWAYS OF CHICAGO. 
To the Civic Federation of Chicago: 

Your committee appointed to conduct an examination of the 
true financial condition of the Street Railways of Chicago, so far 
as the same is shown by the books of account and corporate records 
of the various street railway companies, beg leave to report : 

Immediately upon their appointment, your committee took up 
and pressed the negotiations then pending to obtain access to the 
corporate records and books of account, with the result that Mr. 
Edmund F. Bard, an expert accountant of this city, was employed 
to make the examination, the details of which are embodied in his 
report herewith submitted. The report speaks for itself and bears 
evidence of the ability and fidelity with which the work was done. 

This examination could not have been had without the consent 
and active co-operation of the street railway companies themselves, 
and full recognition is given to the courtesies extended and the 
service thus rendered by their officials to your committee, the Civic 
Federation and the public generally. 

The question of compensation for franchises must necessarily 
turn on some plan of profit sharing, for it is only the excess of 
profit remaining after payment of all proper operating and mainte- 
nance charges, together with reasonable returns on the investment, 
which can justly be demanded by the public. The first question 
is, therefore, what is the amount of actual profit. 

This preliminary investigation is the one to which your com- 
mittee has addressed itself. We believe no similar publication of 
facts has ever been made, for the reason that never before have 
street railway books been opened to a similar investigation. 

Among the most important facts involved in the problem under 
consideration must be the amount of capital invested; the mode of 
issuing the stock, bonds and other securities of the companies ; the 



6 MUNICIPAL AFFAIRS. 

mode of charging expenditures and to what extent rebuilding: is 
charged to construction or capital account; the leases or other 
agreements existing between different companies; the amount of 
dividends which have been paid ; the gross and net income ; the cost 
of property used in operating street railways ; the present value of 
such property; and others which will readily occur. 

Obviously, it is only from the books and records of the com- 
panies that many of these facts can be ascertained at all; and it 
seems that not all of them have ever been fully ascertained even 
by the companies themselves, previous to this examination. 

Your committee had the report of Mr. Bard in hand early in 
1899, but it was embarrassed by the extreme desirability of having 
the report accompanied when published by such summaries, ex- 
planatory matter, etc., as would render it more easily understood 
and thus increase its usefulness. Besides, in the opinion of your 
committee, it is mainly with reference to formulating ordinances 
relating to the street railways of Chicago, and particularly to re- 
newals of the ordinances soon to expire by limitation rather than 
the framing of statutes to be passed by the legislature, that this 
information is most pertinent and valuable. 

It is a subject of sincere congratulation that your committee 
has secured the services of Dr. Milo Roy Maltbie, Editor of 
Municipal Affairs, and a well-known writer on municipal and 
economic subjects, to prepare the accompanying summary. While 
the particular views expressed by him are his own, we feel sure 
they will carry added weight for that reason. The committee does 
not think it desirable, however, at this time to formulate any policy 
nor to adopt any of the inferences drawn from the facts disclosed. 
Those facts it deems weighty and important and their present pub- 
lication timely. This report is submitted in the full confidence 
that it will aid in the solution and the speedy, just and final settle- 
ment of a situation not satisfactory at present from any point of 
view, and one which is intolerable in many of its phases. 

Respectfully submitted. 

WILLIAM A. GILES, Chairman; 
ADOLPH NATHAN, 

JOSIAH L. LOMBARD, 

JOHN H. GRAY, 

NEWTON A. PARTRIDGE. i 



ANALYSIS OF FINANCIAL OPERATIONS 



By Milo Roy Maltbie. 



The examination of the books of account and records of the 
principal street railway companies of Chicago made by Mr. Edmund 
F. Bard is altogether unique. I know of no other instance in the 
United States where a street railway company voluntarily has 
opened its books and permitted an expert accountant to examine in 
detail all its financial operations. For the first time, the inner work- 
ings of several large companies in a large and important city are 
brought to view. For the first time, we know exactly what it has 
cost to construct different kinds of street railways, what allowance 
has been made for depreciation, what franchises are worth, how 
they have been capitalized, what methods have been adopted in 
financing these enterprises, etc. 

To comprehend the full value and importance of this study, a 
brief account of the street railway situation in Chicago and of the 
circumstances under which the examination of the books was per- 
mitted, is necessary. 

Early Operations* 

Street railways were first operated in Chicago in 1859. A period 
of slow development followed, during which all street cars were 
operated by animal power, except a few suburban steam dummy 
lines, with the consequent inadequate service and high operating 
cost. It was not until 1880 that serious steps were taken to 
improve the service by the adoption of cable traction. 

At this time there were three companies operating in three quite 
distinct parts of the city, viz. : (1) the Chicago City Railway Com- 
pany on the South Side, that portion of the city lying south of the 
river and east of the south branch; (2) the North Chicago City 
Railway Company on the North Side, north of the river and east of 
the north branch, and (3) the Chicago West Division Railway Com- 
pany on the West Side, west of the north and south branches. 



8 MUNICIPAL AFFAIRS. 

Each had a monopoly in its area, due partially to the topographical 
nature of the city and partially to agreement, tacit or otherwise. 
The river has always rendered communication between the three 
sections difficult and expensive. The natural course of traffic is to 
and from the center of the city along radial lines, very few persons 
wishing to pass between the West and South Sides or the West and 
North Sides. (See Exhibit I, § 9.) 

The Chicago City Railway Company was the first to adopt cable 
traction, being forced to do so by the competition of steam roads 
which paralleled its main lines. The State Street and Cottage 
Grove Avenue lines were the first converted, beginning about Janu- 
ary 1, 1 88 1. The other companies began to adopt mechanical 
traction several years later — 1886 and 1887. Early in the nineties 
electricity was introduced and now the horse railroad has almost dis- 
appeared, and the cable, once so common, is giving way to the 
trolley. 

Duration of Franchises* 

The three roads above named, and others subsequently organ- 
ized, secured most of their present franchises to use the streets in 
the seventies or eighties, for periods not exceeding twenty years, the 
legislative act of 1874 having fixed this as the maximum limit. The 
most sweeping city ordinance was that of July 30, 1883, which ex- 
tended all of the existing franchises to use the streets to 1903. Sev- 
eral other ordinances have since been passed, notably in 1886 and 
1887, but almost without exception the periods have so been fixed 
as to terminate in 1903, 1906, 1907, or thereabouts. In some cases 
no limit was stated, and the city may terminate these franchises at 
any time. 

The only exception to the rule that street railway franchises 
have been granted for short periods, usually about twenty or 
twenty-five years, is the "Ninety-Nine-Year" Act passed in 1865, 
This Act extended the life of the Chicago City Railway Co., the 
North Chicago City Railway Co. and the Chicago West Division 
Railway Co. to ninety-nine years, the act of incorporation passed in 
1859 having restricted it to twenty-five years. It also attempted 
apparently to extend the franchises to use the streets already 
granted to ninety-nine years, but the language is not explicit. It 
certainly was not intended to include all subsequent grants made by 



CHICAGO STREET RAILWAYS. 9 

the city. Thus, under the interpretation most favorable to the com- 
panies, there are only a few franchises to use the streets, most fran- 
chises having been granted since 1865, which could by any possi- 
bility run on until 1958, and if the courts should strictly construe the 
Ninety-Nine-Year Act, all would terminate at dates not more re- 
mote than 1916, most of them about 1903. * 

Legislation Attempted. 

The situation in 1897 was briefly this: Most of the franchises 
were to expire in ten years or less. The cable roads needed, or 
soon would need, to be replaced by electric lines. But of course 
capitalists would not furnish the requisite funds upon such short- 
term franchises. Furthermore, unless the periods were extended, 
the price of the securities would soon begin to decline, gradually 
reaching a very low figure. Also, the political situation seemed 
favorable to the companies; the council and the legislature were 
apparently friendly. 

Bills were introduced into the legislature, currently known as 
the Humphrey bills, extending for fifty years the franchise rights 
granted by city ordinances, giving the companies many valuable 
privileges and requiring in return very little from the companies 
either in the way of compensation or public control. The corpora- 
tions at first seemed to have the necessary support to enact the 
measures, but popular feeling ran so high that it influenced many 
members of the legislature, and, after a very bitter fight, the bills 
were voted down by a large majority. 

The street railway interests then tried a new measure, the Allen 
bill, which contained some of the most objectionable features of the 
Humphrey bill, but which was an improvement in other respects.* 
This bill became a law in the summer of 1897. In November, 1898, 
elections were held for seats in the legislature, and the whole State 
was so worked up by the prostitution of public interests for the 

J The roads have been so unsuccessful in getting statutes or ordinances ex- 
tending their franchise rights in the streets that they now are attempting to get 
a judicial interpretation of the Act of 1865, and claim that the 99-year clause 
applies to all franchise rights. No one else believes this, but it may be that the 
courts will hold that it applies to all grants previous to 1865, which will leave the 
roads a few important franchises. 

*The principal difference between the two bills was that the Humphrey bill 
itself extended the franchise rights of the companies 50 years; the Allen bill 
authorized city authorities to do this. 



10 MUNICIPAL AFFAIRS. 

aggrandizement of a few corporations that nearly every man who 
had supported the Humphrey and Allen bills was either refused a 
renomination or defeated at the polls. The legislature which met 
the following winter — 1899 — repealed the Allen law by a prac- 
tically unanimous vote before the Chicago companies had derived 
any benefit therefrom. The city council refused to exercise the 
power conferred by the Allen law and extend franchises fifty years. 
Thus, in 1899, the street railroad interests were precisely where 
they were in 1896, and there was little prospect of getting favors 
from the legislature or the city council. The public was extremely 
hostile and suspicious ; the council was no longer controlled by "the 
gang," and the legislature had been taught a lesson it was not likely 
soon to forget. Evidently the companies were hard pressed; and 
only five years remained before the expiration of many of their 
franchises. 

All of this experience had taught the companies that the public 
could no longer be disregarded. Conditions had greatly changed, 
and the policy of the corporations must change also. 

The Scope of the Investigation* 

In June, 1898, after the enactment of the Allen law and after the 
city council had refused to accede to the demands of the companies 
for an extension of franchises, the Civic Federation invited Mr. 
C. T. Yerkes, who controlled the North and West Side companies 
and who was the spokesman for these companies in the contro- 
versy, to give an address at a public meeting on the street railway 
situation. He complied and evinced a strong desire to placate the 
public and to secure co-operation in formulating and procuring the 
needed ordinances. Mr. Newton A. Partridge, who was principal 
spokesman for the Civic Federation, insisted that the city could not 
be expected to go into a blind pool and approve a plan suggested 
by the street railway companies when all of the data regarding the 
operations of the companies were unknown to it. That would be 
playing with loaded dice. If fair treatment were to be expected, 
after the public had been so shamefully abused and deceived in the 
two years just passed, the books of the companies must be opened 
to examination by an expert. 

This Mr. Yerkes subsequently consented to do, recognizing the 
logic of the argument. A committee of the Civic Federation was 



CHICAGO STREET RAILWAYS. 11 

appointed, consisting of Josiah L. Lombard (chairman), Adolph 
Nathan, Newton A. Partridge, Sigmund Zeisler, William A. Giles, 
John H. Gray, Paul O. Stensland, Edwin Burritt Smith, Thos. C. 
MacMillan, E. G. Keith, Franklin MacVeagh, Zina R. Carter, John 
W. Ela and Wm. K. Ackerman. This committee was reorganized 
in 1900 with the following members: Josiah L. Lombard (chair- 
man), William A. Giles, Adolph Nathan, Franklin H. Head, John 
H. Gray, James L. Houghteling, Newton A. Partridge, Edwin Bur- 
ritt Smith, Sigmund Zeisler, Edmund J. James, Zina R. Carter and 
John W. Ela. The sub-committee, which had direct management 
and supervision of the investigation and which signs this report, 
consisted of William A. Giles (chairman), Adolph Nathan, Josiah 
L. Lombard, Newton A. Partridge and John H. Gray. 

Mr. Yerkes did not speak for the Chicago City Railway Co., as 
he did not control this road, but when it was found that the! 
other lines were to open their books, the South Side company 
agreed to do the same. Mr. Edmund F. Bard, a professional ac- 
countant, immediately began work, and the results of his investiga- 
tions are Exhibits I. to VI. He had access to the books of account 
and corporation records of all the important surface roads. Sev- 
eral of the suburban lines recently constructed are not included, as 
they have been in operation only a short time. These are relatively 
unimportant, as their business is small, and the companies treated 
herein hold the key to the whole situation. Mr. Bard's report cov- 
ers the Chicago City Railway Co., the North Chicago City Rail- 
way Co., the North Chicago Street Railroad Co., the Chicago West 
Division Railway Co., the Chicago Passenger Railway Co. and the 
West Chicago Street Railroad Co. It ends with December 31, 
1897 — the last year for which complete data were available when he 
began his work. To bring the monograph down to date — July 1, 
1901 — the facts for the last three years and a half have been gath- 
ered from the financial papers, principally the Economist. How- 
ever, few changes have been made since January 1, 1898, and they 
do not materially alter the figures Mr. Bard gives for 1897. 

Face Value of Liabilities. 

-Of all the many facts established by this examination, those 
bearing upon the value of the franchises will be most eagerly sought 



12 MUNICIPAL AFFAIRS. 

for. To compute this value one first finds the market value of all out- 
standing liabilities, or, in other words, the sum which must be ex- 
pended in order to gain complete control of the companies. It is 
evident that this can be done only by purchasing at market value 
all outstanding stock, bonds and other evidences of indebtedness. 
From the amount thus expended there must be subtracted the 
market value of all assets, or the sum which one would receive if all 
the properties except the franchises were sold. The remainder 
evidently is the market value of the franchise. 

The liabilities of the various companies July I, 1901, were as 
follows : 

CHICAGO CITY RAILWAY COMPANY 

Capital stock $18,000,000.00 

Miscellaneous obligations 232,488.22 

Total $18,232,488.22 

CHICAGO UNION TRACTION COMPANY.* 

Capital stock, preferred $12,000,000.00 

Capital stock, common 20,000,000.00 

Miscellaneous accounts payable 2,233,165.00 

Total $34,233,165.00 

NORTH CHICAGO CITY RAILWAY COMPANY. 

Capital stock $500,000.00 

Bonds, 4J/2 and 4 per cent 2,997,000.00 

Due North Chicago Street R. R. Co 6,172,331.89 

Total $9,669,331.89 

NORTH CHICAGO STREET RAILROAD COMPANY. 

Capital stock $7,920,000.00 

First mortgage bonds, 5 per cent 4,800,000.00 

Bills payable 1,196,200.00 

Miscellaneous accounts 9i,395.o8 

Total $14,007,595.08 

CHICAGO PASSENGER RAILWAY COMPANY. 

Capital stock $1,340,300.00 

Bonds, 5 and 6 per cent 1,734,000.00 

Due West Chicago Street Railroad Co 49,158.49 

Total $3,123,458.49 



*The Chicago Union Traction Co. has not been examined by Mr. Bard, as it 
was organized after he made his investigation. These items have been taken 
from the company's report, as published in the Investors* Manual for 1901. The 
published statement of June 30, 1901, does not give assets or liabilities. The 
figures given cannot be far from accurate, however. 



CHICAGO STREET RAILWAYS. 13 

CHICAGO WEST DIVISION RAILWAY COMPANY. 

Capital stock $1,250,000.00 

First mortgage bonds 4,070,000.00 

Due West Chicago Street Railroad Co 4,869,908.38 

Total $10,189,998.38 

WEST CHICAGO STREET RAILROAD COMPANY. 

Capital stock $13,189,000.00 

First mortgage and consolidated bonds, 5 per cer 10,000,000.00 
Bills payable, tf/% per cent, miscellaneous 5,169,252.67 

Total $28,358,252.67 

A total face value of $117,814,289.73 

Market Value of Securities. 

Proceeding now to find the value of these securities, the first 
question that arises is, What date shall be taken at which to com- 
pute their market value ? In this resume I have attempted to make 
it complete to July 1, 1901, which would suggest the selection of 
that date. But the quotations for one day may not represent the 
true state of the market. To avoid this error, the Stock Exchange 
quotations for the first two weeks in July have been used. This 
period is particularly well suited for the purpose, as the market 
was normal, showing no marked fluctuations, and as the period was 
one neither of boom prices nor marked depression. 

The prices secured by averaging the stock quotations for this 
period are: Chicago City Railroad Co., 209; Union Traction Co., 
preferred, 60; common, 19; North Chicago Street Railroad Co., 
200; West Chicago Street Railroad Co., 100. The stocks of three 
companies were not dealt in during July 1-13, but accepting the 
prices used in the Harlan report, which is considered very conserva- 
tive, we have: North Chicago City Railway Co., 600; Chicago 
West Division Railway Co., 650; Chicago Passenger Railway Co., 
100. 

Computing market values at these figures, the liabilities of the 
Chicago City Railway Co. are worth $37,852,488.22, those of the 
Chicago Union Traction Co. $13,233,165, in each case accepting the 
miscellaneous obligations at their face value. 

In the case of the North Chicago City Railway Co. only 2,499 
shares of stock are to be valued, as the purchase of the stock and 
bonds of the Chicago Union Traction Co. would itself transfer 2,501 
shares which this company took over from the North Chicago 
Street Railroad Co., when it made the agreement of 1899. (See 



14 MUNICIPAL AFFAIRS. 

infra.) These shares, together with the other obligations taken at 
par, have a market value of $10,668,731.89. 

The Chicago Union Traction Co. also owns $2,000,000 of stock 
in the North Chicago Street Railroad Co. The market value of 
the remaining 59,200 shares would be $11,840,000. Adding the 
other liabilities at face value, we have a total of $17,927,595.08. 

Turning to the West Side roads, the liabilities of the Chicago 
Passenger Railway Co. amount to $2,393,458.49. Seven thousand 
three hundred shares of stock are owned by the Chicago Union 
Traction Co., which would be purchased with the stock and bonds 
of that company, leaving 6,103 to be valued at $100 per share, or 
$610,300. The bonds, bearing 5 and 6 per cent, interest, are worth 
more than par, but their face value has been taken. 

The Chicago West Division Railway Co. has liabilities yet out- 
standing valued at $13,001,848.38; 6,251 shares of its stock being 
owned by the Chicago Union Traction Co., and the bonds being 
taken at par, although selling at a premium. 

Of the West Chicago Street Railroad Co.'s stock, $3,200,000 
are owned by the Chicago Union Traction Co. This would leave 
99,890 shares at $100 per share, or $9,989,000, plus $15,169,252.67 
in other liabilities at par value, or a total of $25,158,252.67. 

MARKET VALUE OF LIABILITIES. 

Chicago City Railway Co $37,852,488.22 

Chicago Union Traction Co 13,233,165.00 

North Chicago City Railway Co 10,668,731.89 

North Chicago Street Railroad Co 17,927,595.08 

Chicago Passenger Railway Co 2,393,458.49 

Chicago West Division Railway Co 13,001,848.38 

West Chicago Street Railroad Co 25,158,252.67 

Total $120,235,539.73* 

Value of Assets, 

From this amount one must subtract the present value of all 
property, real and personal, except the franchise rights in the 
streets. 

After careful analyses of the accounts, Mr. Bard computes the 
total original cost of all property belonging to the six companies, exclu- 

1 This is a very conservative estimate. The bonds have been computed at par, 
whereas the latest quotations showed a premium in almost every instance. The 
assumed market values of stocks are below what they have been selling for. But 
it is better to give the companies the benefit of all reasonable doubts than to 
retard private enterprise by harsh treatment. 



CHICAGO STREET RAILWAYS. 15 

sive of the franchises, upon December 31, 1897, at $41,328,379.72, dis- 
tributed as follows '} 

Chicago City Railway Co $1 1,603,960.71 

North Chicago City Railway Co 4,616,009.47 

North Chicago Street Railroad Co 6,060,777.00 

Chicago Passenger Railway Co 1,677,411.29 

Chicago West Division Railway Co 5,783,713.65 

West Chicago Street Railroad Co •. 11,585,607.60 

Total $41,328,379.72 

In order to bring these calculations up to date, I have incor- 
porated the changes made since January 1, 1898, which are few and 
quite accurately known. They consist principally in the organiza- 
tion of a new company — the Chicago Union Traction Co. — the re- 
funding of a small amount of indebtedness and the construction of 
a small amount of electric road. With these changes, which alter 
but one item and add a new one, I find that upon July 1, 1901, the 
total original cost of all property except the franchises was $44,922,- 
011.72, apportioned as follows: 

Chicago City Railway Co 12,984,460.71 

Chicago Union Traction Co 1 $2,2i3,i32.oo 

North Chicago City Railway Co 4,616,909.47 

North Chicago Street Railroad Co 6,060,777.00 

Chicago Passenger Railway Co 1,677,411.29 

Chicago West Division Railway Co 5,783,713.65 

West Chicago Street Railroad Co 11,585,607.60 

Total $44,922,011.72 

But in this suppostitious process of buying all liabilities and 
of selling all property three cash payments would be made from 
one company to another, which are not included in the assets above, 
as Mr. Bard shows that they have nothing to secure them except 
franchises, so that the assets of two companies would be larger 
than indicated in these tables. I refer to $6,172,331,89 due the 
North Chicago Street Railroad Co. by the North Chicago City Rail- 
way Co.; $49,158.49 due the West Chicago Street Railroad Co. by 
the Chicago Passenger Railway Co. ; and $4,869,998.38 due the same 
road by the Chicago West Division Railway Co. These payments 
would alter the assets somewhat, giving the following results : 

*In valuing the assets, every piece of property has been included except 
franchises. Thus the above items include not only the value of the plant and 
equipment necessary to operate the road, but stocks and bonds owned, accounts 
receivable, cash on hand, etc. I will return to this point later. 



16 MUNICIPAL AFFAIRS. 

ORIGINAL COST VALUE OF FINAL ASSETS JULY I, I9OI. 

Chicago City Railway Co $12,984,460.71 

Chicago Union Traction Co. 1 2,213,132.00 

North Chicago City Railway Co 4,616,909.47 

North Chicago Street Railroad Co 12,233,108.89 

Chicago Passenger Railway Co 1,677,411.29 

Chicago West Division Railway Co 5*783,713.65 

West Chicago Street Railroad Co 16,504,764.47 

Total $56,013,500.48 

But these computations allow nothing for depreciation since 
"original costs" were expended. Of course, the books show nothing 
as to what this depreciation would be, and it is possible only to make 
a rough estimate. This I have done, always keeping well within 
conservative bounds. The estimated present market value of all prop- 
erty, exclusive of franchises, is $34,750,000, or $45,841,488.76 if one 

include the amounts due from company to company. 2 

Amounts includ'g 
Inter- Company- 
Obligations. 

Chicago City Railway Co $9,800,000 $9,800,000.00 

Chicago Union Traction Co 2,000,000 2,000,000.00 

North Chicago City Railway Co 2,300,000 2,300,000.00 

North Chicago Street Railroad 5,250,000 11,422,331.89 

Chicago Passenger Railway Co 1,300,000 1 1,300,000.00 

Chicago West Division Railway Co 4,000,000 4,000,000.00 

West Chicago Street Railroad Co 10,100,000 15,019,156.87 

Total $34,750,000 $45,841,488.76 

Value of Franchises, 

Deducting these amounts from the value of the liabilities as 
computed above, we have : 

Value of liabilities, July 1, 1901 $120,235,539.73 

Original cost value of assets, as corrected 56,013,500.48 

Value of franchises, upon basis of original cost. $64,222,039.25 

Value of liabilities, July 1, 1901 $120,235,539.73 

Estimated present value of assets 45,841,488.76 

Value of franchise ." $74>394>o50-97 

2 This figure is for July I, 1900. 

2 Attention is called to the fact that I am here speaking of "assets," not "plant" 
nor "productive assets," but all assets, whether they have or have not any value at 
present 



CHICAGO STREET RAILWAYS. 17 

This amount represents the minimum value, for at every point 
the companies have been given the benefit of the doubt. The de- 
preciation since time of construction has been estimated at a very 
low figure. The stock, bonds, accounts receivable, etc., have been 
estimated at their face value, although, in many instances, their 
real value is almost nothing, for they produce little income and are 
secured by property of little value. Further, the value of the fran- 
chises to the city is much greater than $75,000,000, for the market 
value of the stocks is undoubtedly influenced by the probable early 
termination of the franchises. If perpetual grants were given, mar- 
ket values would go up, and also franchise values, as a result. 

Market Value a Fair Basis* 

The above method of computing the value of franchises has so 
often been criticised that it may not be out of place briefly to state 
why it is believed to be fair and equitable, and why it has been 
adopted here. 

The question, What is the value of street railway properties? is 
precisely analagous to the question which confronts the assessor 
when trying to value real estate, or the business man when at- 
tempting to find the worth of any piece of property. Each goes to 
those who are most familiar with such properties, and wisely so. 
Then why should we not go to the Stock Exchange, where securities 
are dealt in by those most competent to judge, and accept the 
opinion of such experts as shown by actual sales? 

The rejoinder that only a small number of shares are sold in a 
brief period, and that if all the stock were dumped upon the market, 
prices would be much lower, has no weight. The same would be 
true of everything. If all the corn were to be dumped upon the 
Board of Trade at once prices would go to pieces. But that does 
not cause the dealer to conclude that the "going price" is too high 
and that he had better "sell short." Far from it; instead, he will 
almost invariably assert that the present value is as correctly esti- 
mated by the market quotations as it is possible to fix it. The small 
amount of stock sold at current prices indicates that the holders con- 
sider it worth more than is bid, rather than that the bids are too 
high. 



18 MUNICIPAL AFFAIRS. 

Corporation lawyers sometimes plead that taking the market 
value capitalizes good will, skill and ability. The same excuse 
might be offered by the old settler who, believing real estate in a 
certain locality will increase in price, secures all of it he can; and 
when his predictions are justified, argues that his land ought not be 
assessed at its present value, for by so doing a burden is imposed 
upon his foresight and skill. Again, it would be equally true that 
where poor management is shown, lack of ability has influenced 
market values, and that they are lower than they should be and 
would be ordinarily. It does not seem that such an unusual amount 
of skill and foresight has been used in the management of the Chi- 
cago companies as to call for reduction in the market values to 
bring the quotations down to the normal level, or to such as the 
average railway manager would produce. If I am not mistaken, it 
would be easily possible to secure a considerable number of men, 
any one of whom could manage the street railways of Chicago as 
efficiently as they have been managed. It is only when a brilliant 
manager gives to the securities a higher value than they would 
have under the average manager that a reduction from the market 
price ought to be made. This is certainly not the condition of af- 
fairs in Chicago at present. 

Meaning of "Original Cost," 

The methods of valuing the assets will also withstand criticism, 
and to make perfectly clear what is fact and what is estimate, two 
sets of figures have been given: (i) original cost; (2) estimated 
present value, allowance having been made for depreciation. 

In working out the figures for "original cost value of assets," 
Mr. Bard first obtained an exact and complete inventory of all 
property, not including the franchise, but mileage and kind of track, 
equipment, rolling stock, real estate, buildings, supplies, stocks 
and bonds owned, accounts receivable, etc. He then proceeded to 
ascertain from the books the "original cost" of these various items, 
viz., the cost when originally purchased. 

This amount is obviously not what the property would bring at 
public or private sale, for most of the items have depreciated, and 
one — land — may have, probably has in every case, appreciated. 
And if there are stocks and bonds, it is very seldom that their face 
value is their market value. It should be emphasized, however, 



CHICAGO STREET RAILWAYS. 19 

that the amount above given as the original cost is more than fair 
to the companies, for all in all the depreciation is considerably 
greater than the increase in values. The market value is much less 
than the "original cost" value. If, when the franchises expire, the 
city should pay the "original cost" value as above computed, the 
companies would be very generously treated, even more generously 
than they in justice can expect. This is especially true in view of the 
fact that the companies have always paid large dividends. 

How to Obtain Present Value. 

In order to obtain the present value of the franchises, it is 
necessary, therefore, to estimate the extent to which the various 
properties have depreciated. Now depreciation arises principally 
from two sources: (i) Wear due to use, (2) introduction of new 
inventions which make necessary the renewal of machinery and 
plant before they are worn out. 

Depreciation due to wear may be, and often is, provided for by 
charges for "repairs and maintenance" paid out of earnings. To 
capitalize such expenses, either directly by charging them to "con- 
struction account," or indirectly, by failing to keep the system in 
good condition, depending upon stock or bond issues to replace 
worn-out plant, is bad financiering. Wages might be capitalized 
with equal propriety. The proper way is to keep the plant and 
equipment fully repaired, and to pay the expense out of earnings. 
When this is done, no depreciation is chargeable for wear. 1 

The kind of depreciation which is most generally disregarded 
is that due to the substitution of new inventions for old and less de- 
sirable processes. For example, the old horse railroads were still 
capable of giving fairly good service, as horse roads go, when con- 
verted into cable or electric traction; but it was impossible longer 
to continue animal power. The conversion involved considerable 
loss — a loss almost equivalent to the original cost of the road, as- 
suming that the road was in good repair. Now this depreciation 
should have been guarded against and a fund created (equal to the 
cost of the old track and equipment) so that part of the expense of 
constructing the new road would have been paid without issuing 

*It may be urged that it is impossible to keep a road in as good condition 
as in the beginning. Quite true. But it is possible to produce the same result 
by accumulating a sinking fund or depreciation account from payments from 
earnings. 



20 MUNICIPAL AFFAIRS. 

new stock or bonds, or the old stock and bonds retired. The 
amount of this fund should always equal, as nearly as possible, the 
value of the plant and equipment displaced. In other words, the 
capital stock, bonds and other liabilities, less sinking funds, reserve 
funds, depreciation funds, etc., should always be equivalent to the 
market value of the properties, excluding the franchise. Of course, 
it is impossible to keep them exactly equal, as no one can forecast 
just when new inventions will revolutionize existing systems, but 
there should always be some near approximation. And the amount 
placed each year to the credit of a depreciation account should be 
paid from earnings, just as much as expenditures for coal or oil. 

Depreciation Not Written Off by Companies. 

With these rules as a standard, let us examine the operations of 
the companies to see how far the principles have been applied. 

Comparing the face value of the liabilities outstanding upon 
July I, 1901 — amounting to $117,814,289.73 — with the "original 
cost value of the assets," placed at $56,013,500.48, there is an ex- 
cess of $61,800,789.25. This shows that even allowing for no depre- 
ciation since the present plants were constructed, there are nearly 
$62,000,000 which should have been written off long ago. Taking 
the estimated present market value of the assets — $45,841,488.76— 
a very conservative estimate, the depreciation which has not been 
provided for amounts to $71,972,800.97 at least. 1 In other words, 
there is "water" to the amount of $72,000,000 in the liabilities of 
the companies. 

When the operations of the companies are examined in detail, 
which will be done immediately, one will see how this result was 
brought about Expenditures for repairs and maintenance have 
been paid out of earnings, but these have seldom, if ever, been of 
sufficient amount to keep the plant in as good condition as when 
built. Further, no depreciation fund has been accumulated to write 
off old capital when the new plant was purchased; but, instead, 
stocks and bonds have been issued to provide the new funds, and 

*It may be well again to call attention to the fact that this sum does not 
represent the estimated value of the plant and equipment of the street railroads 
clone, but includes securities held by a few of the companies, cash on hand, bills 
receivable, etc. Further, the total depreciation upon plant, not including real 
estate, would be much greater, for from the depreciation of the plant one has to 
•ubtract the appreciation of land to get at the net depreciation of the assets. 



CHICAGO STREET RAILWAYS. 21 

the old stocks and bonds, incurred for worn-out and antiquated 
plant, have been retained as part of the liabilities. Thus the present 
systems are made to earn dividends not only upon existing 1 capital, 
but upon the "original cost" of scrap iron and refuse. In a few 
instances stock and bond dividends have been declared without any 
attempt to cover up the watering process. 

Ordinarily in business such a process would be disastrous, re- 
tarding progress and ending in bankruptcy, but in the case of 
municipal monopolies it is different. The street railway business 
is not a competitive business. Competition has been eliminated 
in Chicago between the surface lines. Franchises are very valuable, 
and the watering of stock by failing to write off depreciation has 
been counterbalanced by the increasing value of the franchises, so 
that the companies pay interest upon bonds and still make a rea- 
sonable profit upon the stock, which really includes at least $72,000,- 
000 of water. It is interesting to note that this amount of water is 
almost equal to the value of the franchises as estimated above, 
which shows that the companies have virtually capitalized the 
franchises. 

From one point of view, it matters little whether liabilities 
are $50,000,000 or $500,000,000. What do the stockholders care 
whether they get 10 per cent, on $50,000,000 or 1 per cent, on $500,- 
000,000. The net profit is $5,000,000 in each case. But there are 
serious objections to stock watering. In the first place, there will 
come a time when readjustment is necessary, when the water must 
be squeezed out. This is apt to discredit a company and make in- 
vestors suspicious of its securities. In the second place, the adop- 
tion of new processes is retarded, because the capital nominally 
invested is already so large as to make the negotiation of new issues 
difficult. In the third place, it throws dust in the eyes of the public, 
for they do not know how much capital is actually invested, and are 
inclined to assume that the securities represent the true amount. 
Thus companies paying 5 per cent, are often left to themselves, and 
others paying 20 per cent, are discussed and investigated, when, as 
an actual fact, the former are paying the larger rate of profit upon 
the true amount of capital invested. This is a principal reason why 
companies operating franchises have almost invariably so increased 
their capital stock as to bring the dividends down to the average 



22 MUNICIPAL AFFAIRS. 

rate in other lines of business. 1 Then, in the fourth place, if the 
securities greatly exceed the value of the plant, the company is in 
a position to compromise, to give the city something, without in 
reality relinquishing much. And if dividends are near the going 
rate in other lines, the cry "confiscation" may be raised whenever 
the public attempts to make the company give compensation for 
franchise rights. 

Rate of Profit. 

Having found the value of the plant and the amount of water 
in the securities, we are now able to compute the rate of profit upon 
the amount of capital actually invested. 

The gross earnings of the Chicago Union Traction Co. — the 
lessee of the five roads upon the North and West sides — for the 
year ending June 30, 1901, were $7,289,139. Other receipts, ex- 
clusive of the income from stocks of other street railway corpora- 
tions in Chicago, amounted to $107,355, making a total of $7,396,- 
494. The expenses amounted to $4,335,155, leaving a profit of $3,- 
061,339. The Chicago City Railway Co. received, during 1900, 
$5,543,180, expended $3,655,002, and had a profit of $1,888,178. 
The total gross earnings of both companies were, therefore, $12,- 
939.674, and the profits $4,949,517. 

What now is the capital value upon which to compute the rate 
of profit? In the preceding pages, the "original cost value of the 
assets" was found to be $56,013,500.48, and the estimated present 
value $45,841,488.76. But neither amount is the capital which is 
producing the profit of $4,949,517. Four of the companies include 
among their assets stocks and bonds of other companies, accounts 
and bills receivable, inter-company obligations, deposits, etc., which 
produce very little income and have little value. These items aggre- 
gate some $22,000,000, which, subtracted from the "original cost 

value," would give the following: 

Cost Estimated market 

value of plant value of plant 

Companies. alone, July 1, 1901. alone, July 1, 1901. 

Chicago City Railway Co $12,415,604.37 $9,800,000 

Chicago Union Traction Co 927,895.00 900,000 

North Chicago City Railway Co 4,616,909.47 2,300,000 

1 In 1897 at the annual meeting of the stockholders Mr. Yerkes suggested the 
reduction of dividends on the North Chicago Street Railroad capital stock as a 
matter of policy to one-half the rate of 12 per cent, per annum then paid by 
the simple expedient of "doubling the stock." 



CHICAGO STREET RAILWAYS. 23 

North Chicago Street Railroad Co 1,805,388.65 , 1,400,000 

Chicago Passenger Railway Co 1,677,411.29 1 1,300,000 

Chicago West Division Railway Co 5,783,713.65 4,000,000 

West Chicago Street Railroad Co 6,383,147.34 4,900,000 

1 s 

Total $33*610,069.77 $24,600,000 

Eliminating the small income which these stocks, bonds, etc., 
produced — $30,266 — from the gross income as given above, the net 
income is $4,919,251. This is a profit of 14.6 per cent, upon the 
original cost value of the plant or of the productive assets, or 20 
per cent, upon the estimated present market value of the plant or 
of the productive assets. • 

Upon a capitalization of $33,600,000, it follows that the com- 
panies could pay the city 12 per cent, of gross income, lay aside 4 
per cent, for depreciation in excess of the ordinary charges for re- 
pairs and maintenance, and still pay 6 per cent, dividends. Upon a 
capitalization of $24,600,000, which still is probably in excess of 
the market value of the plant, the companies could pay the city 
almost 20 per cent, of gross income, lay aside a depreciation fund 
of 4 per cent, and pay 6 per cent, dividends. Or, upon a capitaliza- 
tion of $24,600,000, the companies could lower fares to 4 cents and 
still accumulate a depreciation fund of 4 per cent, a year and pay 
dividends amounting to 6 per cent. This computation is upon the 
basis of present traffic, but if fares were lowered to 4 cents, the 
traffic would increase considerably, and thus enable the companies 
either to still further lower fares or pay larger dividends. 

Present Compensation for Franchises, 

Either one of these alternatives could be adopted if the capitali- 
zation approximated the market value of the plant, and this also in 

addition to the following payments made to the city in 1900. 1 

Car licenses $61,440.24 

Personal property tax 210,955.36 

Maintenance of bridges 3,000.00 

Percentage of receipts 1,647.56 

Mileage compensation 811.67 

Extensions of electric light 30,000.00 

Maintenance of electric lighting 10,000.00 

$317,854.83 

x Real estate taxes are excluded because this property is assessed by the local 
town assessors and there are no statistics to show what is the total amount. If 
given, it could not be construed as compensation for franchises, as its value is 
determined irrespective of franchise rights. 

These figures have been furnished by the City Controller's office to which 
I am greatly indebted. 



24 MUNICIPAL AFFAIRS. 

In addition the companies are required to pave a portion of the 
streets, but there is no record of the amount actually expended. 

These payments are in a sense compensation for the franchises 
granted ; and if there were no such payments to be made, the market 
values of the securities would be more than at present. But as they 
were paid out of gross earnings before market values were fixed, the 
city evidently receives nothing for $75,000,000 in franchises now be- 
ing operated by the street railway companies. In other words, pri- 
vate corporations are using $75,000,000 of capital for which they 
pay not one cent of compensation. Evidently some readjustment 
of conditions is greatly needed. 

Let us now examine each of the seven companies somewhat in 
detail. 

History of the Chicago City Railway Co* 

Street railways were first operated in Chicago in 1859 — about 
the same time that they were introduced in other cities — and im- 
mediately checked the growing business of the omnibus lines. 
Upon February 14, 1859, a special act of the legislature incorpor- 
ated two companies, namely, the Chicago City Railway Co. and the 
North Chicago City Railway Co. The former took over franchises 
previously granted to private persons, and soon had constructed 
lines in the south and west divisions of the city. The latter were 
sold to the West Division Railway Co. in 1863, and since that time 
the Chicago City Railway Co. has confined its operations to the 
South Side — that portion of the city south and east of the Chicago 
River. 

Horse traction was almost universal until 1881, only three 
miles out of the forty-five being operated by steam upon January 
1st of that year. Cable power was introduced the year following 
and in a few years a large proportion of the road had been con- 
verted. It is advisable, therefore, to strike a balance at the close of 
1880 and ascertain what had been the financial results up to that 
date. 

Upon December 31, 1880, there were 45.679 miles of horse rail- 
road (the figures for mileage are always given in this study in 
terms of single track — 1 mile double track being equivalent to 2 
miles single track); $1,319,062.91 had been paid out for "Construe- 



CHICAGO STREET RAILWAYS. 25 

tion," namely, roadbed, track and street paving, or $28,854.89 per 
mile. Nothing had been credited to this account for depreciation, 
and this amount represented not only original cost, but changes and 
reconstruction as well. From the data given in the books of the 
company, showing the cost of part of the road and of the paving, 
Mr. Bard has estimated (and his figures seem to be over, rather 
than under, the actual cost) that the original cost of the roadbed 
existing on December 31, 1880, was $772,596.08, or $16,913.59 per 
mile. (See Exhibit I, Sec. 1.) 

The total assets and liabilities of the company upon that date 
were (Exhibit I, Sec. 1) : 

ASSETS. 

Roadbed $772,596.08 

Real estate 234,423.63 

Buildings 202,472.75 

Personal property 473,442.29 

Bills receivable 2,606.00 

Cash 3,976.41 $1,689,517.16 

LIABILITIES. 

Capital stock $1,500,000.00 

Bills and accounts payable 152,093.67 

Drivers' deposits 16,977.90 1,669,071.57 

Surplus December 31, 1880 $20,445.59 

According to the books the surplus was $676,092.43, but no 
allowance had been made for depreciation, which represents the 
difference between the two figures. 

Since 1881 the conversion to cable and electric traction has con- 
tinued, until at present only 5 out of the 182 miles owned and oper- 
ated by the Chicago City Railway Co. are horse road, 35 miles are 
cable and 142 miles electric. (See Exhibit I, Sec. 8.) 

The total cost value of all property existing December 31, 1897, 
and the outstanding obligations are as follows (See Exhibit I, 
Sect. 6) : 

ASSETS. 

Cable road $2,606,280.24 

Electric road 3,142,425.17 

Horse road 105,741.43 

Leased road 170,000.00 

Illinois Cenral Railroad construction 60,590.92 $6,085,037.76 

Rolling stock 1,521,931.60 

Real estate 1,993,362.50 



26 MUNICIPAL AFFAIRS. 

Machinery 1,208,853.21 

Miscellaneous property 225,919.30 

Stock, bonds, accounts receivable 28,768.20 

Cash on hand 540,088.14 

Total '. $11,603,960.71 

LIABILITIES. 

Capital stock $12,000,000.00 

Bonds 4,619,500.00 

Accounts payable 232,488.22 $16,851,988.22 

Deficit $5,248,027.51 

Since December 31, 1897, only a few changes have been made 
in the debit and credit sides of the ledger, and the conditions upon 
July i, 1 901, can be stated with very close approximation. During 
1899 and 1900 $1,500,000 in stock were added to the liabilities, and 
upon July 1, 1 90 1, $4,500,000 more were issued, making the total 
capital stock $18,000,000. The proceeds of the last issue, together 
with $119,500 from the treasury, went to retire the bonds then due. 
Assuming that the remainder produced by these stock sales — 
$1,380,500 — was spent in increasing the value of the assets (an as- 
sumption perfectly fair to the company), we have for the original 
cost value of the assets upon July 1, 1901, $12,984,460.71, and for 
the liabilities $18,232,488.22. This would leave an excess of liabil- 
ities over assets — a deficit — of $5,248,027.51/ 

This is the sum which is properly chargeable to depreciation 
and which should have gradually been written off by the company. 
If account be taken of depreciation since construction (for the road- 
bed is not as good as when built and cable traction is going out of 
use and other systems must be adopted before long), the deprecia- 
tion would be considerably increased. The original cost of the 
present assets was nearly $13,000,000, but they could not be sold 
for more than $9,800,000 at the very most, and probably for not 
more than $8,500,000. Adopting the maximum figure, the deficit 
would be over $8,400,000. In other words, the market value of the 
assets is sufficient to pay about $9,800,000 to the stockholders, who 
nominally should receive $18,000,000. Of course the franchises 
are further security, and if they should not be terminated for four 

'Of course the minor items have changed since December 31, 1897, but the re- 
ports of the company do not show to what extent, and as they would not affect the 
figures materially, I have taken them as in 1897. 



CHICAGO STREET RAILWAYS. 27 

or five years the profits of the company would be sufficient to pay 
dollar for dollar, if devoted exclusively to wiping out the deficit — 
or writing off the depreciation. 

The history of the stock and bond issue shows how very re- 
munerative the street railway industry upon the South Side has 
been. In 1881 the capital stock was $1,500,000, which has grad- 
ually been increased to $18,000,000. All of this stock, except pos- 
sibly $250,000, which was issued as dividends, has been sold to 
stockholders at par. Without exception, it could have been sold at 
a premium immediately after issue, which means that a large bonus 
has been given to the stockholders each time. Including the regu- 
lar annual dividends of 10 per cent, in 1882 and 12 per cent, each 
year since, the extra dividends in stock, bonds and cash, and the 
premiums upon the stock and bond issues, we have total dividends 
of $37,602,187.50 paid between January 1, 1882, and January 1, 
1898, or an average of 44.63 per cent, per annum for sixteen years. 
(Exhibit I, Sec. 7.) Since January 1, 1898, $6,000,000 in stock 
has been issued at par, $1,000,000 in July, 1899, $500,000 in August, 
1900, and $4,500,000 July 1, 1901. The market price of the stock 
after the first issue was 2jy f after the second 242, and after the third 
209. The bonus upon the 1899 issue was, therefore, $1,770,000; 
upon the 1900 issue, $710,000, and upon the 1901 issue, $4,905,000. 
The percentages for the respective years, upon the basis of stock 
outstanding when sales were made, were 14 3-4, 5 6-13 and 36 1-3 
respectively. Adding the regular quarterly dividends for these 
years — 12 per cent, per annum — the total dividends would be 26 3-4 
per cent., 17 6-13 per cent, and 48 1-3 per cent., respectively, an 
average of nearly 31 per cent, for the last three years. 

It is to be remembered, however, that the stock contains at least 
$8,400,000 of water ; the present value of the productive assets — the 
real capital — being not more than $9,800,000. The net earnings 
for 1900 were $1,888,000, which, upon a capitalization of $9,800,000, 
would yield dividends of over 19.2 per cent. Thus, the Chicago 
City Railway Co. could give the city 20 per cent, of its gross earn- 
ings and still pay 8 per cent, dividends upon the actual capital in- 
vested. Or, it could pay the city 16 per cent, of gross earnings, lay 
aside 4 per cent, for depreciation and still pay 6 per cent, dividends. 
Or, it could reduce fares to 4 cents on the basis of the present traffic 



28 MUNICIPAL AFFAIRS. 

and still pay 8 per cent, dividends upon the actual capital invested. 
Or, it could sell 6 tickets for 25 cents and lay aside 4 per cent, for 
depreciation and 6 per cent, for dividends. The increase in traffic 
which would follow this reduction of fares would probably render a 
still further reduction possible. 

North Side — North Chicago City Railway Co. 

The first company to operate a street railroad upon the North 
Side — the North Chicago City Railway Co. — was incorporated Feb- 
ruary 14, 1859, as seen above. The great fire of 1871 practically 
destroyed all of its property, but reconstruction was at once begun, 
and by May 24, 1886, there were in operation 44.774 miles of track 
— horse traction; $2,054,277.65 had been expended for construc- 
tion, real estate, buildings, rolling stock, etc. Yet the capital stock 
was only $500,000. Of the bonds outstanding — $1,247,000 — at 
least $750,000 had been issued to stockholders as dividends ; and of 
the remaining $497,000 a considerable portion had probably been 
issued in a similar way. Thus, even assuming that the stock had 
fully been paid in, it is evident that the road had been built princi- 
pally out of profits. (Exhibit II, Sec. 2.) 

The original cost value of the plant upon May 24, 1886, ex- 
clusive of the franchise, is shown by the trial balance to be (Ex- 
hibit II, Sec. 2) : 

1. Real estate $245,188.37 

2. Personal property, inventoried at 482,739.66 

3. Buildings 418,024.84 

4. Construction 908,324.78 

Total $2,054,277.65 

Allowing for appreciation and depreciation, the plant was not 
worth more than $1,500,000 and perhaps could not have been sold 
for more than $1,250,000. The market value of the stock was 
about $500 per share and the franchises were worth at least $2,100,- 
000, and probably nearer $2,500,000. 

Such was the financial condition of the North Chicago City 
Railway Co. upon May 24, 1886, when an agreement was entered 
into with the North Chicago Street Railroad Co., which had been 
incorporated six days previous, and which was controlled by Messrs. 



CHICAGO STREET RAILWAYS. 29 

Yerkes, Widener, Elkins and their associates. 1 In brief, this con- 
tract provided for the leasing of the property and franchises owned 
by the North Chicago City Railway Co. for a term of 999 years, in 
return for which the North Chicago Street Railroad Co. agreed to 
pay the interest on all bonds and mortgages of the lessor outstand- 
ing and to be created, and a quarterly payment of $37,500. The 
lessee further agreed to construct a cable road on North Clark 
street, the actual cost of which was to be borne by the lessor, pay- 
ment being secured by a mortgage bearing interest at 6 per cent, 
per annum, payable semi-annually. Additional lines and improve- 
ments were to be constructed as mutually agreed, to be paid for as 
above or by bonds secured by a mortgage, at the option of the 
lessee. A concluding clause provided that when the North Clark 
Street cable road should be completed, the lessee should pay to the 
lessor company $500,000 in cash or in capital stock at the option of 
the former company — a sum just equivalent to the capital stock of 
the North Chicago City Railway Co. (Exhibit II, Sec. 1.) 

These terms were apparently very favorable to the old company, 
as the quarterly payments were equivalent to a 30 per cent, annual 
dividend, payable quarterly, upon the total capital stock. Doubt- 
less the company also considered the $500,000 bonus as an addi- 
tional compensation equivalent at least to 6 per cent", annual divi- 
dend, and in case the North Chicago Street Railroad Co. should be 
prosperous, equivalent to a 10 or 12 per cent, annual dividend, or 
more, making a total of 40 per cent, or more upon the actual capi- 
tal stock of the old company. 

Comparing the cash quarterly payments, the interest on the 
bonds and the bonus with the probable market value of the plant, 
one finds the price paid equivalent to at least 16 per cent., and pos- 
sibly 18 per cent., on the maximum estimate of $1,500,000, or i8£ 
per cent., and possibly 21 per cent., upon $1,250,000. This was a 
very liberal sum, but probably not more than the value of the fran- 
chises warranted. 

One wonders at first glance why the old company should desire 
to lease its property even upon such favorable terms when it was 

*Care must be taken to distinguish between the North Chicago City Railway 
Co. (N. C. C. R. Co.) and the lessee company, the North Chciago Street Railroad 
Company (N. C. S. R. R. Co.). 



30 MUNICIPAL AFFAIRS. 

in such good financial condition, and why the new company should 
be willing to pay such a high price for the properties even though 
it were not more than the market would warrant. The preamble 
to the agreement furnishes only a partial explanation. It states 
that the old company considered a change in the motive power 
wise and necessary. But apparently it did not have the courage 
to make the experiment. This the new company was willing to do, 
and upon terms that appeared to be very favorable to the old com- 
pany. The operations of the lessee under the agreement will show 
how it evaded the strict letter of the contract and how it burdened 
the minority stockholders with a very large debt. Possibly the 
North Chicago Street Railroad Co. had prearranged this course 
of action. 

On May 24, 1886 (the date of the agreement between the two 
companies), the lessee — the North Chicago Street Railroad Co. — 
made a contract with the United States Construction Co. to build 
the North Clark street cable line. Under this agreement, which 
was very loosely drawn, and other agreements made in 1886 and 
1887, the United States Construction Co. completed work for which 
it received $4,500,000 in capital stock in the new road, $998,000 in 
4^ per cent, bonds of the old company and $710,908.39 in cash from 
the new road, a total of $6,208,908.39. The cost to the Construc- 
tion Company, according to the very liberal estimates of Mr. Bard, 
could not have exceeded $3,141,741.32. (Exhibit II, Sees. 4 and 5.) 

Thus, if the securities were selling at par there would be a profit 
to the United States Construction Co. of $3,067,167.07. But the 
amount is still larger, for almost immediately the stock went to a 
premium, and since 1892 has been worth over $200 per share. 

This large profit was charged against the North Chicago City 
Railway Co. in apparent violation of the contract which required 
the North Chicago Street Railroad Co. to keep an exact account 
of the cost and to debit the lessor that amount only. It may be 
claimed that the cost was $6,200,000, as that was the sum paid the 
United States Construction Co. by the lessee. But the contract 
was merely a subterfuge, as the United States Construction Co. 
originally owned 49,990 of the 50,000 shares of the capital stock 
first issued, and the same men controlled both companies. (Ex- 
hibit III, Sec. 3.) 



CHICAGO STREET RAILWAYS. 31 

The improvements paid for by the North Chicago Street Rail- 
road Co., without the intermediation of the Construction Company, 
amounted to $1,634,421.54, to which should be added $79,001.96 of 
floating debt assumed by the lessee, making the total expenditures 
of the lessee for the account of the lessor $7,922,331.89. The 
lessor company has paid $1,750,000 in bonds, leaving a balance still 
'due the lessee on December 31, 1897, of $6,172,331.89. (Exhibit 
II, Sec. 5.) 

The original cost value of the assets existing December 31, 1897, 

were as follows : 

73.32Q miles single track road $3,184,280.14 

Real estate 245,188.37 

Buildings 1,187,440.96 

Personal property, per inventory 489,489.66 

Total $5^06,399.13 

The outstanding liabilities upon the same date were : 

Capital Stock $500,000.00 

First mortgage 6 per cent, bonds 500,000.00 

Consolidated 4^ per cent, mortgage bonds 2,497,000.00 

Due N. Chi. St. R. R. Co. for expenditures for betterments 6,172,331.89 

Total $9,669,331.89 

showing an excess of $4,562,932.76 over the original cost value of 
existing plant. But as the cost value is only $2,109,399.13 in ex- 
cess of the outstanding bonds, which are a first lien upon the prop- 
erty, there remain $4,062,932.76 of the claim of the lessee and 
nothing but the franchise to secure it and the claims of the stock- 
holders. (Exhibit II, Sec. 8.) 

Indeed, the company is in a much worse condition than these 
figures indicate, for in taking the cost value of the assets at $5,106,- 
399.13, no allowance was made for depreciation, which would be a 
very considerable sum on every item except the real estate. It is 
very much doubted whether the market value of the assets, ex- 
clusive of the franchise, is sufficient to liquidate the outstanding 
bonds. 

North Side — North Chicago Street R, R. Co. 

The financial condition of the North Chicago Street Railroad 
Co. is considerably better than that of the road just treated. Be- 
tween May 24, 1886, and December 31, 1897, it had expended on its 
own account $6,874,589.08, of which $4,255,388.35 represent invest- 
ments in stocks and bonds of other companies, accounts and bills 



32 MUNICIPAL AFFAIRS. 

receivable and other assets which are not used directly in the oper- 
ation of the road, leaving a total expenditure for plant of $2,619- 
200.73. (Exhibit III, Sec. 4.) The cost value of the plant as it 
existed on December 31, 1897 (excluding again the stocks, bonds, 
etc.), was $1,805,388.65, showing a depreciation of $813,812.08. 
(Exhibit II, Sec. 5.) 

The original cost of all the property as it existed December 31, 
1897, was $6,060,777, to which should be added $2,109,399.13 — the 
excess of the estimated original cost of the North Chicago City 
Raliway Co. properties over outstanding obligations, which the 
North Chicago Street Railroad Co. might claim as a part payment 
of the amount due it, making the total assets $8,170,176.13. (Ex- 
hibit III, Sec. 5.) There are outstanding liabilities amounting to 
$7,407,597.08, leaving $762,581.05. This book value and the value 
of the franchise constitute the security of the $6,600,000 of capital 
stock. Here again no allowance has been made for depreciation 
upon existing plant, which would be considerable, and if allowed 
for, would cause liabilities to exceed assets considerably. (Exhibit 
III, Sec. 6.) 

Notwithstanding the lack of real property as security, the stocks 
of the two companies have always been valuable. From 1886 to 
December 31, 1892, the company paid dividends, including stock 
dividends and bonuses as well as regular dividends, averaging 6.86 
per cent, upon the capital stock. From 1893 to 1897 they averaged 
25.24 per cent, per year. The total amount of extra dividends in 
the shape of stocks and bonds amounted to $3,548,000, the regular 
dividends to $5,764,253.50, a total of $9,312,253.50. To this 
amount should be added 30 per cent, on the $249,900, the outstand- 
ing stock of the North Chicago City Railway Co., or a total, up to 
December 31, 1897, of $822,670. The aggregate profit of the 
stockholders of both companies was, therefore, $10,134,923.50 from 
May 24, 1886, to December 31, 1897 — not a very bad showing for 
roads whose property, exclusive of franchise rights, would not sell 
for a sufficient amount to meet outstanding obligations. (Exhibit 
III, Sec. 7.) 

Since 1897 no changes have been made in the assets and liabili- 
ties of the North Side lines. In 1899 they were leased to the Chi- 
cago Union Traction Co., but this will be treated of later. 



CHICAGO STREET RAILWAYS. 33 

To complete the history of the North Side roads it only remains 
to show the relations of the North Chicago City Railway Co., the 
North Chicago Street Railroad Co. and the United States Construc- 
tion Co. A majority of the stock of the first company (2,501 
shares) was purchased by the North Chicago Street Railroad Co. in 
1886. This company in turn was controlled by the United States 
Construction Co., which would not produce its books for examina* 
tion; but if current report and financial papers are to be believed* 
the Construction Company was controlled by Messrs. Yerkes, 
Widener, Elkins and their associates. Thus, as far as the majority 
interest of the lessor is concerned, any financial deal between the 
two companies would simply be taking money from one pocket and 
putting it in another. But not so as to the minority interest — the 
stockholders who did not also hold stock in the United States Con- 
struction Co. ; they would be burdened with a heavy debt, and such 
was possibly the purpose of the lessee or its backer, the United 
States Construction Co. The agreement of May 24, 1886, was 
plain, but as the Construction Company virtually controlled the 
majority of stock in the company being manipulated, it would have 
been difficult, even if the minority stockholders desired, to know 
what was going on and to remedy it. Indeed, the issuing of the 
stock of the lessee before the United States Construction Co. had 
a title to it in order that the latter company might speculate in it 
before it was paid for, is characteristic of the way in which the 
North Side companies have been manipulated in the interest of a 
few individuals. 

"West Side — Chicago Passenger Railway Co* 

The first street railway built upon the West Side was constructed 
by the Chicago City Railway Co., which transferred its lines to the 
Chicago West Division Railway Co. in 1863. But the present re- 
lations of the various companies can most easily be understood if 
one begins with the fourth company organized, viz., the Chicago 
Passenger Railway Co. This company was incorporated Febru- 
ary 12, 1883, and in 1888, when an agreement was made with the 
West Chicago Street Railroad Co., it owned 29.79 miles of horse 
railroad. Its capital stock was $1,000,000 (10,000 shares) and the 
outstanding bonds amounted to $400,000. (Exhibit IV, Sec. 1.) 

The first agreement between the Chicago Passenger Railway 



34 MUNICIPAL AFFAIRS. 

Co. and the West Chicago Street Railroad Co., under date of No- 
vember 16, 1888, stipulated, among other things, that the former 
should convert the horse road into a cable line for certain specified 
distances upon Desplaines, Washington and Franklin streets. The 
two companies were to use this line jointly, and as a consideration 
the lessee was to pay the entire cost of construction and 5 per cent, 
per annum of the amount which should be paid by the Chicago 
Passenger Railway Co. in rebuilding and repaving the Washington 
street tunnel. The same company was also to provide for the trac- 
tion of the cars of the Chicago Passenger Railway Co. through the 
tunnel and around the loop into the central portion of the city ; the 
amount charged therefor to be a reasonable sum as later agreed 
upon. The duration of the contract was fifty years. (Exhibit IV, 
Sec. 1.) 

This agreement was not satisfactory and upon March 15, 1889, 
just four months later, it was so amended as to require the lessor 
to issue 6 per cent, bonds to fund its floating indebtedness, to pay 
for improvements contracted for (probably referring to the obliga- 
tions incurred under the preceding agreement), and to pay for any 
construction work under the present agreement, except the cable 
road provided for above. All of these bonds were to be guaranteed 
by the lessee, which thereafter was to receive the gross receipts 
and to pay all operating expenses. As remuneration, this com- 
pany was to pay the lessor $25,000 semi-annually, being 5 per cent, 
per annum on the outstanding stock. The other provisions were so 
modified as to release the Chicago Passenger Railway Co. from 
paying for traction of its cars and the West Chicago Street Rail- 
road Co. from paying the 5 per cent, rental. Upon April 12, 1897, 
the lease was extended, making the full term sixty-five years, expir- 
ing March 14, 1954. (Exhibit IV, Sec. 1.) 

The similarity between this operating agreement and the one 
made in 1886 between the North Side companies suggests that both 
were conceived by the same brain. Such, indeed, was the fact, for 
the West Chicago Street Railroad Co. was dominated by the same 
men who controlled the United States Construction Co. and the 
North Chicago Street Railroad Co. A further similarity is to be 
seen in the fact that a majority of the stock of the lessor was owned 
by the lessee at the time the agreements of 1888 and 1889 were con- 



CHICAGO STREET RAILWAYS. 35 

summated. Thus the minority stockholders were the ones prin- 
cipally affected, as in the case of the North Side company. 

The operations under these agreements cannot be definitely 
stated, as the books of the company are inaccessible. But the fol- 
lowing estimates are sufficiently accurate for all practical purposes. 
Since 1889 4-4 miles of horse railroad have been constructed at a 
cost of $104,737.66, making the original cost of the 34.19 miles of 
horse railroad $814,504.67. Upon December 31, 1897, there re- 
mained 2.38 miles, which cost $56,705.12, leaving $757,799-55 to 
represent depreciation due to conversion of the road into cable and 
electric traction. (Exhibit V, Sec. 4.) 

The original cost value of the assets existing December 31, 1897, 
was as follows (Exhibit IV, Sec. 4) : 

2.836 miles single track cable $273,547.60 

0.314 miles single track cable 43,715-51 

2.38 miles single track horse railroad 56,705.12 

28.585 miles single track electric railroad 542,240.07 

Real estate and buildings 761,202.99 

Total $1,677,411.29 

The outstanding liabilities upon the same date were (Exhibit IV, 
Sec. 5) : 

First mortgage 6 per cent, bonds $400,000.00 

Consolidated 5 per cent, bonds 1,334,000.00 

Capital stock 1,340,300.00 

Due W. Chi. St. R. R. Co 49,158-49 

Total $3,123,458.49 

Upon the face of these figures liabilities exceed assets to the 
extent of $1,446,047.20. It is quite likely that a re-appraisement of 
the real estate would reduce this deficit considerably, perhaps to 
$500,000. (Exhibit IV, Sec. 5.) But as no allowance has been 
made for depreciation, the original cost value being given above, 
the present value of all assets does not exceed $1,300,000, allowing 
for appreciation of real estate, and probably is less. 

West Side— West Division Railway Co. 

Returning now to the West Division Railway Co., the books 
show that it was incorporated February 21, 1861. About 1863 it 
purchased the West Side lines of the Chicago City Railway Co, 
and their extensions to the business center of the city, paying about 



36 MUNICIPAL AFFAIRS. 

$200,000, according to current report. Upon October 20, 1887, 
the date of the agreement with the West Chicago Street Railroad 
Co., the West Division Railway Co. owned 98.45 miles of horse 
road. The construction cost was $1,935,131.52, or $19,655.98 per 
mile. This comparatively low figure was due principally to the 
practice of paying for extensions and betterments out of surplus 
earnings, and to the small amount of paving and poor character. 
Only 14 out of a total of 98.45 miles of track were paved, and those 
mostly with cheap macadam. Upon October 20, 1887, the original 
cost of all assets, including 7,300 shares of Chicago Passenger Rail- 
way Co. capital stock, was $5,468,071.17. The total outstanding 
liabilities amounted to $4,816,511.06, showing a surplus of $651,- 
560.11. (Exhibit V, Sec. 2.) 

Computing the value of the securities at market rates, the value 
of the physical property at $3,700,000 and the miscellaneous ac- 
counts at their face value, one finds that the franchise was worth at 
least $5,800,000, and possibly over $6,000,000/ 

The West Chicago Street Railroad Co. was incorporated July 
19, 1887, and upon the following November 11, when a lease of the 
Chicago West Division Railway was proposed and approved, 99,497 
of the 100,000 shares of stock were voted by C. T. Yerkes. At that 
time Messrs. Widener, Elkins and Kemble apparently owned 6,251 
of 12,500 shares of stock of the Chicago West Division Railway 
Co., one share more than one-half of the entire number. Thus the 
lease was virtually made by Mr. Yerkes upon one side and Messrs. 
Widener, Elkins and Kemble upon the other, although nominally 
the lessee was the Chicago West Division Railway Co. (Exhibit 
VI, Sec. 1.) 

The language of the agreement was somewhat vague and in- 
volved, but in the light of subsequent operations, its provisions are 
quite clear. In substance it dealt with three matters: (1) The 

*It is difficult to select the proper price at which to estimate the stock. During 
1886 the quotations ranged about $400 per share bid and $425 asked. In May, 
1887, they had risen to $475 bid and $600 asked. The net earnings for ten months 
preceding the signing of the agreement were at the rate of 35 per cent, per annum 
upon the capital stock, which would give a market value of $700 per share upon a 
5 per cent, basis, or $650 conservatively estimated. The above franchise value has 
been computed upon a $475 basis; but, assuming that the stock would bring $650 
per share, the franchises would be worth $8,000,000 instead of $5,800,000. (See 
Exhibit VI., Section 6.) 



CHICAGO STREET RAILWAYS. 37 

construction of a cable road; (2) the lease of the entire property 
of the Chicago West Division Railway Co. to the West Chicago 
Street Railroad Co. ; t (3) the transfer of the 6,251 shares owned by 
Messrs. Widener, Elkins and Kemble. As to the first, it was stipu- 
lated that the lessee should build not less than 17 miles of cable 
road, and for the purpose of an accounting, should keep an accurate 
account of the cost of all permanent improvements. As regards 
the second, the franchises and property of lessee, including the 7,300 
shares of the Chicago Passenger Railway Co., were to be leased to 
the West Chicago Street Railroad Co. for 999 years, in return for 
which the lessee was to pay the lessor company 35 per cent, per 
annum upon the capital stock, or $109,375 quarterly, 1 and assume 
the outstanding bonded debt of the old company, amounting in all 
to $4,070,000? As compensation for the transference of the 6,251 
shares of stock and the negotiation of the lease, Messrs. Elkins, 
Widener and Kemble were to receive $4,100,000 in 5 per cent. 40- 
year bonds of the lessor and $6,000,000 in cash or capital stock at 
the option of the lessee. (Exhibit VI, Sees. 1-5.) 

Upon its face, the agreement seems to be very fair to all par- 
ties concerned, except possibly the lessee. Messrs. Elkins, Wid- 
ener and Kemble certainly had no cause for complaint, as they 
received $10,100,000 in securities, worth more than par, for nego- 
tiating the lease and for 6,251 shares of stock which could not have 
cost them more than $4,375,700 ($700 per share), and probably con- 
siderably less, even if they did not secure an option, which they 
could have done early in 1887 at very little expense. Five million 
dollars for negotiating the lease is a very remunerative compensa- 
tion, and it is not easily explicable why Mr. Yerkes should have 
agreed to such an enormous and apparently uncalled for expense, 
unless he expected to recoup his losses by subsequent operations, or 
had an exaggerated idea of the value of the West Side properties, 
and could not secure control without accepting these rather hard 
terms. Probably there is some truth in each of these suppositions, 

'This would be equivalent to an annual payment of 17 per cent, upon the 
maximum estimated value of the plant, exclusive of the franchise. 

'One may wonder at the apparent inconsistency between amount of the bonded 
debt given here and upon page above. The additional amount here given — $1,052,000 
— was issued during the transferrence of the property in order to fund fio<*inn 
debt and settle accounts. 



88 . MUNICIPAL AFFAIRS. 

but $10,100,000 for stocks having a face value of $625,100 is an 
enormously high price; $1,615 for a share of stock whose face value 
is $100, and worth in the market not more than $700, is an unusual 
offer, and most men would sell at a much smaller profit. And when 
a majority of the stock had been secured in the open market, any 
sort of a contract could have been made between the two com- 
panies, for Mr. Yerkes would then control both companies. How- 
ever, Mr. Yerkes probably depended upon subsequent operations 
to offset the large sum paid by his company, and we shall see that 
he did not miscalculate. 

The lessor certainly received all its properties were worth. 
Its bonds were all guaranteed, and later obligations of the lessee 
were substituted for them relieving it of all liability in this direc- 
tion. Thus the stockholders were to receive 35 per cent, dividends 
clear. This was their full market value and indeed somewhat more, 
if we take into consideration the fact that most of the franchises 
expire in 1903 and 1905, and practically all of them, if the 99-year 
act of 1865 should not be upheld by the courts. 

The only offset is the cable road which the agreement pro- 
vided for and seemed to stipulate should be paid for by the lessor 
at cost. But the agreement was never fully carried out, the 
amount charged was excessive and although the bonds are guaran- 
teed and the interest paid by the lessee, a debt has been incurred 
which was much larger than anticipated and which must be settled 
when the agreement is terminated. This was one way in which 
Mr. Yerkes expected to get even, for he was a stockholder in the 
United States Construction Co., which did the work and received 
the unusually high price. This agreement will be given further on, 
when the operations of the lessee are fully treated. 

The books of the West Chicago Street Railroad Co. contain 
no detailed account of the 17 miles of cable road to be constructed. 
They merely show that on November 17, 1887, a contract with the 
United States Construction Co. was authorized for a road upon cer- 
tain streets, for which $4,000,000 in cash or stock, at the option of 
the railroad company, was to be paid. Under this contract 17.47 
miles were built, but just how much of it was chargeable to the 
lessor it is impossible to say. (Exhibit VI, Sec. 2.) 



CHICAGO STREET RAILWAYS. 39 

The financial condition of the company upon December 31, 
1897, is shown by the following summaries. Of the original road 
and the extensions there existed upon that date (Exhibit V, Sec. 5) : 

6.26 miles single track horse road $123,046.43 

68.68 miles single track electric 825,163.04 

68.68 miles paving, relaid 411,495-93 

1 1.655 miles single track cable road (actual) 1,124,188.06 

.321 miles single track cable road (actual) 44,690.05 

13.404 miles single track cable road (estimated) 1,292,888.56 

Real estate on Oct. 20, 1887 449>i58-73 

Buildings on Oct. 20, 1887 927,984.00 

Western Ave. power house 520,455.65 

Halsted St. car house alterations 11,803.70 

New building, Clybourn place 52,839.50 

Total $5,783713.65 

The outstanding liabilities were as follows: 

Capital stock $1,250,000.00 

First mortgage bonds » 4,070,000.00 

Due West Chi. St. R. R. Co 4,869,998.38 

Total $10,189,998.38 

showing a deficit of $4,406,284.73, $1,858,738.60 of which was due 
to the substitution of cable and electric traction for the old horse 
railroad, and the remainder — $2,547,501.13 — represents the loss by 
the transfer of the operating plant to the lessee and the amount, 
which the United States Construction Co. overcharged the lessee 
for construction work and which overcharge this company debited 
to the account of lessor, contrary to the agreement of 1887. 

The actual deficit is much larger than that shown by the books. 
The present worth of the plant is not more than $4,000,000. This 
would swell the deficit to $6,200,000. In other words, the physical 
property would about wipe out the bonds, and the stockholders 
would have nothing but the agreement with the lessee to fall back 
upon. As long as this remains unimpaired they have no fault to 
find, for their 35 per cent, dividends are being declared regularly. 
But in case the contract should be terminated for any reason, they 
would be face to face with a large debt, nearly $5,000,000, and only 
a few franchises with which to pay it. If most of these should be 
terminated in 1903 and 1905, little could be realized from this 
source, certainly not enough to pay the debts and reimburse the 
stockholders. 



40 MUNICIPAL AFFAIRS. 

West Side— West Chicago Street R. R. Co* 

The West Chicago Street Railroad Co. was incorporated July 
19, 1887, and almost immediately leased the franchises and prop- 
erty belonging to the two existing lines upon the West Side, as 
stated in the preceding pages. Its capital stock was $10,000,000, of 
which $9,949,700 was voted upon by Mr. Yerkes as late as Novem- 
ber 11, 1887. (Exhibit VI, Sec. 3.) 

Among the first operations of the company, after the lease of 
1887 with the Chicago West Division Railway Co. had been ap- 
proved, was the making of a contract with the United States Con- 
struction Co., controlled by Messrs. Yerkes, Elkins, Widener and 
their associates, for a cable line, which is set forth above. The 
methods by which the debt of $4,000,000 was paid become impor- 
tant at this point, as they reveal the way in which the capital stock 
was finally issued. 

According to the books, $4,000,000 in cash was paid to the 
United States Construction Co., which deposited $4,000,000 in capi- 
tal stock of the railroad company with Mr. George E. Newlin as 
trustee, with the understanding that it should be paid back as the 
work was completed. The last payment of stock was made Octo- 
ber 22, 1890. Other entries state that the United States Construc- 
tion Co. subscribed for $4,000,000 in capital stock of the West 
Chicago Street Railroad Co. and paid for it in cash. This was un- 
doubtedly a mere subterfuge. Four million dollars in capital stock 
was paid for the cable road, and not in cash, as represented. Mr. 

Bard has gone fully into this, and his reasons for accepting this 
conclusion and disbelieving the book entries are given in Exhibit 

VI, Sections 2 and 3. 

The remaining $6,000,000 of the stock was issued in the fol- 
lowing way: According to the contract with the Chicago West 
Division Railway Co., $6,000,000 in cash or stock was to be paid 
Messrs. Widener, Elkins and Kemble for negotiating the lease. 
The books state, also, that these three persons subscribed for 
$6,000,000 capital stock of the new company, and paid for it in 
cash. The money was immediately repaid to them, $5,000,000 on 
account of the lease and $1,000,000 in advance as part payment 
for the 6,251 shares of the Chicago West Division Railway Co. 
stock. For some time a special account, "Leasehold/' stood upon 



CHICAGO STREET RAILWAYS. 41 

the pages of the ledger with a debit balance of $5,000,000. Later, 
$4,000,000 was transferred from general "Construction" account 
and a new account opened with a debit of $9,000,000, and it still 
existed December 31, 1897. Of this sum not more than $4,000,000 
of stock was actually issued for cash or property, and the payment 
of $4,000,000 for 17.47 miles of cable road is an unusually high 
price. Some allowance might be made, if the stock were at a dis- 
count or seemed likely to sell below par when issued. But there is 
sligh probability that this factor had much influence. The very 
first Stock Exchange quotations, those of June 14, 1889, were above 
par. And, indeed, most of the stock, and possibly all of it, was 
issued before the 6,251 shares were delivered or the cable road 
constructed; so that the persons holding it could have sounded 
the market before obligations to any considerable amount had been 
assumed by them. (Exhibit VI, Sec. 4.) 

How shall we class the $1,000,000 which the books state were 
given in part payment for the stock to be transferred? Is it 
"water" or a legitimate capital expenditure ? This raises the ques- 
tion, How much was paid for the 6,251 shares of the stock, $4,100,- 
000 in bonds or $4,100,000 in bonds and $1,000,000 in stock? Ac- 
cording to the earning power of the Chicago West Division Rail- 
way Co. for ten months preceding the leasing of the road, the 
dividends would be 35 per cent, per annum. The stock would, 
therefore, have a market value of about $700 per share. Six thou- 
sand two hundred and fifty-one shares would represent a market 
value of $4,375,700. If $5,100,000 were paid at the rate of $815.86 
per share, the company would have paid more than the market 
value, which seems very unlikely. Again, the Stock Exchange 
quotations seem to indicate that the average value of the stock at 
the time the negotiations were closed, about June, 1887, was about 
$650 per share. This would give a total value to 6,251 shares of 
about $4,100,000. Further, the plans of financing the North and 
the West Side roads were similar in every other respect, which 
would strongly lead one to believe that the similarity continued 
throughout. Messrs. Elkins, Widener and Kemble could well 
aftord to transfer the stock without making a profit upon the 
transaction at once, when they received $6,000,000 of stock for 
negotiating the lease. But very likely they made a profit on the 



42 MUNICIPAL AFFAIRS. 

stock transaction, which would lessen still more the probability of 

$1,000,000 in stock being part payment for the 6,251 shares. Thus, 

one is forced to the conclusion that at least $6,000,000 out of the 

$10,000,000 original capital stock was "water," and if one goes 

back of the contract with the United States Construction Co., which 

is probably an excuse for violating the agreement between the 

Chicago West Division Railway Co. and the West Chicago Street 

Railroad Co., about $8,000,000 is "water." (Exhibit VI, Sees. 

6 and 7.) 

From the date of organization to December 31, 1897, the 

W r est Chicago Street Railroad Co. expended $29,615,628.13. The 

cost value of the property existing upon the latter date was $16,- 

317,139.34, leaving a depreciation of $13,298,488.79. 

Total Cost value assets, 

expenditures. Dec. 31, 1897. Depreciation. 

Chicago Passenger Railway $1,156,749.52 $859,5°3-i8 $297,246.34 

Chicago West Div. Railway 14,969,998.38 3,872,028.56 11,097,969.82 

West Chicago Street Railroad... 13,488,880.23 11,585,607.60 1,903,272.63 

Total $29,615,628.13 $16,317,139.34 $13,298,488.79 

Analyzing the depreciation of the companies, one finds that of 
the $297,246.34 belonging to the Chicago Passenger Railway Co., 
$104,737.66 was due to the removal of 4.396 miles of new horse road 
and the construction of a trolley road in its place. The remainder, 
$192,508.68, is the difference between the contract price and the 
estimated cost of 2.836 miles of cable road built by the United 
States Construction Co. (Exhibit VI, Sec. 8.) 

Perhaps a few words justifying this procedure will not be out 
of place here, as the plan has generally been followed of estimating 
the actual cost when the amount charged by the United States 
Construction Co. has seemed to be exorbitant in comparison with 
other lines built by other companies. The United States Construc- 
tion Co. was controlled by Messrs. Elkins, Widener, Yerkes and 
their associates. These same parties, either directly through the 
United States Construction Co., which often held stock in the 
companies with which it made contracts, or indirectly by owning 
stock in these companies personally, controlled a majority of the 
stock of the railroad companies. This enabled them to make any 
sort of an agreement. To assume that a contract made under 
such conditions would necessarily be fair to all parties and repre- 



CHICAGO STREET RAILWAYS. 43 

sent what would be agreed upon by two entirely disconnected par- 
ties, requires too implicit confidence in human nature. Thus, when 
we find that the price agreed upon is very much more than the cost 
of similar work done by other companies, even allowing for fair 
contractor's profits, it is doing no injustice and, indeed, it is neces- 
sary, if one is to get at the worth of the plant, to estimate the 
original cost of the present plant at what other companies would 
have performed the service. This is what Mr. Bard has done, and 
in accepting his figures, I approve his methods. 

The depreciation set opposite the Chicago West Division Rail- 
way Co. — $11,097,969.82 — is distributed among the following 
items: Difference between contract price and estimated cost 
of the 13.404 miles of cable road built, by the United States 
Construction Co., $915,067.26; 1.96 miles of horse road converted 
into trolley road, $46,698.51; miscellaneous expenditures, $36,- 
204.05; price paid for negotiating lease, $5,000,000; cost of 6,251 
shares of Chicago Passenger Railway Co. stock, which have no 
physical property as security, $5,100,000; total, $11,097,969. 

The depreciation of the West Chicago Street Railroad Co. 
amounted to $1,903,272.63, apportioned as follows : The difference 
in contract price and estimated cost of the 1.23 miles of single track 
cable road built by the United States Construction Co., $85,069.91 ; 
50.32 miles single track horse road converted into trolley road, 
original cost $1,132,178.36, deduct for street pavement relaid $261,- 
781.75— $870,396.61 ; depreciation in equipment, $286,192.11; mis- 
cellaneous items charged to construction account, $661,614; total, 
$1,903,272.63. 

Including the property transferred under the agreements be- 
tween the companies, the final settlement as to the 6,251 shares of 
stock in the Chicago Passenger Railway Co. and the cash on hand 
December 31, 1897, the above summary would be changed to read 
(Exhibit VI, Sec. 9) : 

Book value assets. Cost value. Appreciation. 

Chicago Passenger Railway... $49,158.49 $1,677,411.29 $1,628,252.80 

Chicago West Div. Railway 4,869,998.38 5783,713-65 9*3,7*5-27 

Depreciation. 
West Chicago Street Railroad. 24,158,908.70 11,585,607.60 12,573,301.10 



Total $29,078,065.57 $19,046,732.54 $10,031,333-03 



44 MUNICIPAL AFFAIRS. 

The cost value of the assets of the two lessor companies are 
apparently in excess of the book value, according to the last sum- 
mary, but this is because the first column shows the liabilities of 
these companies to the West Chicago Street Railroad Co. only, 
whereas, if the remaining liabilities are considered, the result would 
be as follows (Exhibit VI, Sec. 9) : 

Cost 
Total liabilities, value properties. Deficit. 

Chicago Passenger R' way Co. . $3,123,458.49 $1,677,411.29 $1,446,047,20 

Chicago West Div. Railway. . . 10,189,998.38 5783,713.65 4,406,284.73 

West Chicago Street Railroad. 28,358,252.67 11,585,607,60 16,772,645.07 

Totals $41,671,709.54 $19,046,732.54 $22,624,977.00 

When the outstanding liabilities are analyzed still further, one 
finds that in each case the cost of the property is less than the 
bonds and floating debt, as shown by the following: 

Bonds and Cost 

Floating debt. value of property. Deficit 

Chicago Passenger R'way Co.. $1,783,158.49 $1,677,411.29 $105,747.20 

Chicago West Div. Railway... 8,939,998.38 5783713-65 3,156,284.73 

West Chicago Street Railroad. 15,169,252.67 1 3,299,32 1.25 1 1,869,931.42 

Totals $25,892,409.54 $20,760,446.19 $5,i3i,963-35 

Adding the bonds outstanding, the total deficit would be : 

Total deficit. 

Chicago Passenger Railway Co $1,446,047.20 

Chicago West Division Railway 4,406,284.73 

West Chicago Street Railroad 15,058,931.42 

Total $20,911,263.35 

As a matter of fact, the companies are in a still worse condition 
than this. The status of the first two companies has been given 
above. The West Chicago Street Railroad Co. alone remains to 
be dealt with. According to the above tables, this company has 
assets, the cost of which was $11,585,607.50. But, as every one 
knows, the present market value of the plant is considerably less 
than the original cost. The depreciation is certainly not less than 
$1,500,000 and probably more. In other words, the plant, securi- 
ties and accounts receivable would perhaps wipe out the bonds 

x The cost value of property in this table is $1,713713.65 more than in the 
preceding tables, which is due to this fact : The cost value of the C. W. D. R. is 
$5783713.65, or $1713713.65 more than the bonds outstanding, to pay which the 
property has been mortgaged. Thus this amount should be transferred to the credit 
of W. C. S. R. R. Co., whose claim it would be used to liquidate, making its 
assets $13,299,321.25, instead of $11,585,607.60. 



CHICAGO STREET RAILWAYS. 45 

and miscellaneous indebtedness, leaving the stock and the certifi- 
cates of indebtedness to be reimbursed, if at all, out of the fran- 
chise rights, which are far from being ample security in case the 
franchises should be 'terminated by the action of the courts, the 
city council or the legislature. 

Chicago Union Traction Co* 

Since the date at which Mr. Bard's investigation ends, Decem- 
ber 31, 1897, there have been several operations of considerable 
importance. Another company has been formed and new leases 
made between it and the North Chicago Street Railroad Co., 
and the West Chicago Street Railroad Co., thus bringing under one 
management all the important lines upon the North and West sides 
of the city. It also controls, through an operating agreement, 
the Chicago Consolidated Traction Co., which has a large number 
of suburban lines. 

This company was the Chicago Union Traction Co., organized 
May 24, 1899, and composed of New York, Philadelphia and 
Chicago capitalists. Its first act was to purchase Mr. Yerkes' hold- 
ings in the two companies, amounting to 32,000 shares of stock of 
the West Chicago Street Railroad Co. out of a total of 131,890, and 
20,000 shares of the North Chicago Street Railroad Co. of a total 
of 79,200 outstanding. It also leased, June 1, 1899, from these two 
companies all their property and franchises, including the stocks in 
other companies which they had acquired in 1886, 1887, 1888 and 
subsequent years. Thus the new company controls the North 
Chicago City Railway Co., the Chicago Passenger Railway Co. and 
the Chicago West Division Railway Co., as it owns a majority 
of the stock, although it does not own a major portion of the 
stock of the North Chicago Street Railroad Co. and the West 
Chicago Street Railroad Co. 

In return the Chicago Union Traction Co. agreed to assume 
all the obligations of the lessor companies, to guarantee their bonds, 
to pay all sums called for by the preceding agreements between the 
companies, to pay the North Chicago Street Railroad Co. $237,600 
each quarter — equivalent to a 12 per cent, annual dividend upon 
the capital stock of the company — and to pay the West Chicago 
Street Railroad Co. $197,835 per quarter — equivalent to 6 per cent, 
a year upon the capital stock — these being the rates of dividends 



46 MUNICIPAL AFFAIRS. 

which the companies were paying at that time. To secure the 
lessor companies, $10,000,000 in cash or securities were to be de- 
posited with the Illinois Trust and Savings Bank as trustee, and 
$3,200,000 in stock of the West Chicago Street Railroad Co. and 
$2,000,000 in stock of the North Chicago Street Railroad Co. have 
been deposited. The market value of these securities was about 
$7,200,000 upon July 1, 1 90 1. 

The operating agreement with the Chicago Consolidated Trac- 
tion Co. concerns us little, as the lines operated by this company 
have not been examined. 

The outstanding capital stock of the company is $12,000,000 
preferred, 5 per cent, cumulative, and $20,000,000 common. It has 
issued no bonds, but under the agreement guarantees the bonds of 
the lessor companies amounting to $25,770,000 for the North Side 
and West Side companies and $6,750,000 for the Chicago Con- 
solidated Traction Co., total $32,527,000. 

The original cost value of the assets July 1, 1900, were: 1 

ASSETS. 

Construction $116,688 

Reconstruction 216,026 

Real estate 158,922 

Equipment 268,760 

Stocks and bonds 382,344 

Coupon deposits 143,470 

Miscellaneous 538,947 

Accounts receivable 257,941 

Cash 130,034 

$2,213,132 

LIABILITIES. 

Capital stock $32,000,000 

Bills and accounts payable 931,954 

Employees' deposits 61,588 

Coupons 164,170 

Accrued liabilities 1,032,637 

Miscellaneous 42,816 

$34,233,165 

There was in 1900, therefore, a deficit of $32,020,033. That 

is, by the formation of the new company, $32,000,000 have been 

added to the capitalization of the street railroad companies above 

, The last report of the company does not contain a statement of assets and 
liabilities, so it has been necessary to adopt the statement given in the Investors? 
Manual, which is the company's report for year ending June 30, 1900. 



CHICAGO STREET RAILWAYS. 47 

any increase in the physical property. It is true, the company 
owned stocks in various companies amounting to a par value of 
$6,805,200, or a market value of $13,493,750. But as these com- 
panies do not have assets (exclusive of the franchises) of sufficient 
value to meet their outstanding obligations, it is quite correct to 
exclude them from the assets and to say there is a deficit of 
$32,000,000. In other words, the assets equal the liabilities, ex- 
cluding the capital stock, leaving as security for the stockholders 
only the franchises which the company has leased from the other 
companies. And yet the company paid the lessor companies, as 
per agreement, and made a profit for its own stockholders of 3 3-4 
per cent, during 1899- 1900. But after July, 1900, no dividends were 
paid until July i, 1901, which seems to indicate that the franchises 
have been overcapitalized, and that the limit had been reached in 
the attempt to so water the capital stock and bonds as to bring the 
rate of profit down to the market rate — 5 or 6 per cent. However, 
the increasing value of the franchises caused by increasing popula- 
tion will doubtless enable the company soon to pay a fair dividend. 
The overcapitalization of the franchise is only temporary. 

Coming now to the question as to what the companies could 
do if the water were squeezed out of their capitalization and the 
liabilities were equal to the market value of their properties, we 
find that the Chicago Union Traction Co. made net earnings during 
1900-1901 of $3,031,073, not including dividends on stocks owned 
or leased, interests on deposits and premiums. Upon a capitaliza- 
tion of $14,800,000 — the estimated present market value of the 
operating plant and equipment — this would yield a dividend of over 
20 per cent, annually. The company could pay the city over 25 
per cent, of the gross earnings and still declare 8 per cent, dividends 
annually. Or, it could pay the city over 21 per cent, of gross earn- 
ings, lay aside a depreciation fund of 4 per cent, annually and pay 
6 per cent, dividends. Or, it could reduce fares to 4 cents, upon 
the basis of present traffic, lay aside a sinking fund of 4 per cent, 
annually, and divide profits amounting to 6 per cent. Or, it could 
sell seven tickets for 25 cents and pay 8 per cent, dividends. In 
each case the increase in traffic resulting from a lowering of fares 
would make still further reductions possible. 



48 MUNICIPAL AFFAIRS. 

Conclusion. 

Although the financial operations of these seven companies 
have been outlined but briefly, their results are quite evident. 

The franchises given away by State Legislature and City Coun- 
cil were at first only fairly remunerative, but with the growth of the 
city, the rapidly increasing density of population, they became more 
and more valuable. The temptation to capitalize them was too 
strong, and when conversion to cable and electric traction became 
necessary the opportunity was found by which to accomplish this 
end. It did not originate then, for by failing to write off capitali- 
zation as the plant depreciated, the same result was being attained 
before. But this method did not water the stock and bonds fast 
enough. In the eighties and nineties new hands took hold and by 
shrewd manipulations soon capitalized the franchises for all they 
were worth. But by 1899 the franchises had again outstripped 
depreciation, and recourse was had to new leases and a new com- 
pany. 

The final result is that of the present outstanding liabilities, 
amounting nearly to $118,000,000, at least $72,000,000 is "water," 
and if one were to wipe out the assets which produce practically no 
income and are of little value, this amount would approach $90,- 
000,000. Of the total liabilities, $74,200,000 represents capital 
stock and $43,800,000 bonds and miscellaneous obligations. Thus 
all of the stock and part of the bonds are "water." 

The franchise values for which the companies pay the city 
nothing amount nearly to $75,000,000 — a sum almost equal to the 
watered capital — which shows how closely the companies have esti- 
mated the capital to be issued upon the franchises. 

It is not surprising, therefore, to learn that the companies have 
been paying large dividends, even upon watered capital. For ex- 
ample, the Chicago City Railway Co. has paid upon an average 
over 42 per cent, annual dividends for the last nineteen years. 
The North Chicago City Railway Co. has paid 30 per cent, since 
1886; the North Chicago Street Railroad Co. nearly 15 per cent, 
for fourteen years. 

Some claim might in justice be made for large dividends in 
recent years, or an excuse offered for an excess of liabilities over 
assets, if the roads had been constructed before traffic was sufficient 



CHICAGO STREET RAILWAYS. 49 

to pay fair dividends, or if they had met with heavy losses due to no 
fault of their own. But such has not been the case. The roads 
have almost always paid fair and recently enormous dividends. 
One line did lose its property in the fire of 1871, but that was over 
a generation ago and the profits were so large both before and 
after the fire that there has been ample opportunity to recoup all 
losses. 

The large profits which the companies are paying show that 
they can afford to pay the city a generous compensation either in 
the form of cash payments or lower fares. Further, the fact that 
the companies are using franchises worth millions and are paying 
nothing for $75,000,000 in franchises, leads to the conclusion that 
the companies ought to pay considerable. If the "water" were 
squeezed out they could pay 20 per cent, of gross income to the 
city and still declare 6 per cent, dividends, while accumulating a 
depreciation fund of 4 per cent, annually. Or, fares could be low- 
ered to 4 cents, and 6 per cent, dividends and 4 per cent, deprecia- 
tion set aside. Such a policy would enable fares to be still further 
lowered, as the traffic will increase and a depreciation fund of 4 per 
cent, will keep down fixed charges or increase capital value with- 
out increasing outstanding liabilities. Whatever course may be 
adopted, it is certain that the time has passed when private cor- 
porations can expect to use the city's property without paying for 
it. And property worth $75,000,000 is no longer to be had for the 
asking. The problem is: What return is fair to the city and to 
the companies? Neither can afford to be too grasping. The 
welfare of each depends upon an equitable solution. 



ACCOUNTANT'S REPORT. 

EXHIBITS I TO VI. 



By Edmund F. Bard. 



EXHIBIT I.— CHICAGO CITY RAILWAY CO. 

Sec. I* — Financial Operations before Introduction of Cable Traction* 

This company was incorporated February 14, 1859, Dv special 
act of the Illinois Legislature, and immediately succeeded to cer- 
tain rights granted to sundry other persons by the city council of 
Chicago August 16, 1858, for the construction and operation of 
street railroads in the city of Chicago, work upon which had al- 
ready commenced November 1, 1858. By April 25, 1859, little over 
one mile of single track road on State St. from Randolph St. to 
1 2th St. was in operation. Two months later, the road was ex- 
tended to 22d St., the southern limits of the city at that time. 

The rails of this road were spiked to the planks of the corduroy 
road then existing in State St. The equipment consisted of four 
cars and 25 horses. 

Fourteen years later the mileage had increased to 23 miles sin- 
gle track and the equipment to 75 cars and 600 horses. Seven 
years later the mileage was 45.679 miles single track and the equip- 
ment 292 cars and 1,468 horses. 

Of the 45.679 miles of single track road existing January 1, 
1 88 1, three miles, on Cottage Grove Ave. from Oakwood Boule- 
vard to 55th St. and thence on 55th St. to Lake Ave., was steam 
dummy road. 

Incidentally it mav be said that "the cost per day of feeding 
each horse was 22.6 cents ; grooming, 8.9 cents ; for other help, in- 
cluding foremen, nurses, watchmen and watermen, 8.6 cents; of 
tools, blankets and medicine, .01 cent; of bedding, 4 mills, and of 
shoeing, 4.2 cents, a total of 46 cents." 



CHICAGO STREET RAILWAYS. 51 

In 1 88 1 cable power, as a means of transportation, was intro- 
duced, and by January 27, 1882, the first section of 9.033 miles sin- 
gle track cable road built in Chicago was in successful operation. 
Its effect in reducing the operating expenses of the company was 
immediate, the cost of operating a car per mile being 11.2 cents, 
whereas by horse power it was 25.6 cents, and by steam dummy 
19.8 cents. The gross receipts per cable car per mile were 23.7 
cents, showing the ratio of operating expenses for the new motive 
power 47.3 per cent. 

By May 23, 1883, 17.898 miles single track cable road was in 
operation, and by November 21, 1887, a total of 33^.585 miles sin- 
gle track had been built. 

By the end of 1893, 30.261 miles single track road of that char- 
acter were built, of which 9. 114 miles were new extensions of road 
and the remainder old horse road converted into trolley road. No 
further work of this description was done till 1895, when steps were 
taken to convert the remaining horse road of the company into 
electric road, and by December 31, 1897, only 5.074 miles single 
track horse road remained. 

Prior to December 31, 1880, no actual disbursements had been 
made on account of the first section of cable road subsequently 
built on State St. north of 39th St., with possibly the exception of 
$23,998.36 expended on the building at State and 21st Sts. during 
1880, which building subsequently became the power house of the 
section of cable road referred to. 

Up to December 31, 1880, the books of the company show $1,- 
318,062.91 paid out for "Construction ;" that is, road-bed, track and 
street paving. According to this, each mile of single track horse 
road then existing cost $28,854.89. 

There is nothing in the books to show any credit to this account 
for depreciation, and, considering the many changes that occurred 
in the roadbed from the inception of the company to the date first 
referred to, all of which are part of the early history of street trans- 
portation in Chicago, there is reason for assuming that the con- 
struction account of the company on December 31, 1880, repre- 
sented not only the first cost of all original road, but all changes 
and reconstruction thereof thereafter. 

There being no special reason for disposing of this question ac- 
curately, no examination of the books has been made further back 



52 MUNICIPAL AFFAIRS. 

than 1881, except to show the actual cost of road built during the 
five years immediately preceding the introduction of the cable sys- 
tem. For example, in 1877-8, a double track road was built on 
Indiana Ave. between 39th St. and 51st St., and thence on 51st St. 
east to Grand Boulevard, a distance of 3.375 miles single track, at 
a cost of $44,026.14, or $13,044.80 per mile of single track. Dur- 
ing the same period a line was constructed on Halsted St. from 
O'Neill St. south to the Union Stock Yards, a distance of 4.028 
miles single track, at a cost of $53,488.59, or $13,279.20 per mile 
of single track. 

Prior to the introduction of the cable system, it was the excep- 
tion rather than the rule to pave the streets between the rails in 
constructing the road, nor has it ever been the custom of the com- 
pany to do so in extending its road into outlying territory. As 
late as November 18, 1888, an official statement of the company 
shows that 23.14 miles of single track, or 13 per cent, of the present 
mileage, was paved with "dirt," in other words, not paved at all. 
On January 1, 1883, only i-J miles of road on Clark St. and 1 mile on 
Halsted St., aside from the cable roads on State St. and Wabash and 
Cottage Grove avenues north of 39th St. were paved with stone. 

Such pavement as existed prior to December 31, 1880, consisted 
of cheap macadam costing about fifty cents per square yard, or 
$2,346.67 per mile of single track laid. This was the character of 
pavement laid in 1877-8 in the construction of 1.663 miles single 
track road on Wentworth avenue from Archer avenue to 29th 
street, the cost of which section of road, including paving, was 
$25,531.72, or $15,352.81 per mile single track. 

No extensions of road were made in 1879, but the following year 
the sum of $37,216.43 was expended on Clark St. in paving the 
street and laying new rails. From all I can learn of the particulars 
of this expenditure, it seems to have been for granite paving for 
2.347 miles single track north of 12th street and new 63-lb. rails 
for the entire line, indicating that the cost that year per mile single 
track for granite was $2.13 per square yard, and for 482 tons of 
63-lb. rails at $29 per ton, $13,978, or $3,215.55 per mile single 
crack. The first section of road built on the South Side was on 
State St. from Randolph St. to 12th St., and was opened for traffic 
in 1859. It consisted of a single track road with turnouts. Instead 



CHICAGO STREET RAILWAYS. 53 

of being laid on stringers and cross-ties, the rails were spiked to the 
planks of the corduroy road then constituting the only paving the 
street possessed. Subsequently a double track was laid and the 
street between the rails paved with granite, as far south as 12th St. 

This was the condition of the road on December 31, 1880, ex- 
cept that the rails had been extended south to 41st St. 

Estimating the cost of granite paving at $9,901.34 per mile 
single track, the same as on Clark St., and the cost of the re- 
mainder of the road-bed, including rails, at $13,044.80 per mile 
single track, the same as on Indiana avenue, the total cost of a mile 
of single track horse road would be $22,946.80, including granite 
paving, which is about $6,500 more than the same road would cost 
at the present time. 

Assuming that the only lines of road possessing no pavement of 
any character except "dirt" were those already referred to on 
Halsted St. and Indiana Ave., the following estimate of the cost 
value of 45.679 miles single track road -existing on December 31, 
1880, is over rather than under the actual cost, viz. : 

Miles Single Track. Paving. Total Cost. 

1 1. 515 Granite $264,224.80 

26.761 Macadam 410,856.55 

7.403 Dirt , 97,51473 

45.679 Total $772,596.08 

The difference between this total and the balance already stated 
as standing to the debit of "Construction" account on December 
31, 1880, to wit., $545,466.83, represents depreciation. 

The financial condition of the company on the same date was 
as follows: 

ASSETS. 

Roadbed $772,596.08 

Real estate 234,423.63 

Buildings 202,472.75 

Horses, 1,441 151,061.28 

Stable property 10,323.85 

Stationary engines 11,864.60 

Harness 13,307.21 

Office furniture and fixtures 4,070.20 

Cars — 

92 open, at $725.00 $66,700.00 

64 21 -feet, closed, at 836.58 53,541.12 

78 16-feet, closed, at 800.00 62,400.00 

63 14- feet, closed, at 750.00 47,250.00 

Miscellaneous equipments 23,749.02 

253,640.14 



54 MUNICIPAL AFFAIRS. 

Bills receivable 2,606.00 

Cash 3,976.41 

Shop and track tools 12,732,59 

Storehouse supplies 16,442.42 

Total $1,689,517.16 

LIABILITIES. 

Capital stock $1,500,000.00 

Bills payable 105,000.00 

Accounts payable 47,093.67 

Drivers' deposits 16,977.90 

1,669,071.57 

1 Surplus, December 31, 1880 $20,445.59 

Sec. 2. — Cost of First Cable Road. 

It does not appear that any attempt has ever been made by any 
of the companies to charge off the large sum representing depre- 
ciation on account of the radical changes from horse road to cable 
road between 1881 and 1889, and from horse road to electric road 
between 1892 and 1897, and there is very little statistical informa- 
tion of value for this purpose on file in the accounting departments 
of the roads, and apparently no effort has been made to compile it. a 

The absence of data of this character has necessitated a tedious 
and laborious search of the records covering a business period ag- 
gregating 40 years for all the companies examined, for the purpose 
of ascertaining and preparing the necessary information for this re- 
port. 

As regards the $545,466.83 chargeable to depreciation on De- 
cember 31, 1880, already referred to, it is suggested that perhaps a 
part of it represents an expenditure of some character in connection 
with buying out or otherwise disposing of the old opposition omni- 
bus lines, the competition from which threatened insolvency to all 
concerned at one time prior to the introduction of the cable system. 

1 According to the books of the company the surplus was $676,092.43 on the date 
mentioned, but, as already shown, the difference between the totals represents de- 
preciation, or, strictly speaking, the sum which, if credit to "Construction account," 
in other words, marked off to depreciation, would correctly represent the cost value 
of all the property that had ceased to exist or possess any further utility to the 
company in conducting its business, or for any other purpose. 

2 It is difficult with any degree of certainty to ascribe reason for the omission 
of the companies in this respect, but there is, of course, the supposition that any 
adjustment in the accounts that will convert an apparent surplus into a large deficit 
would be discountenanced by the stockholders as well as the management, and the 
average accounting officer has not the temerity to make the adjustment on his own 
responsibility. 



CHICAGO STREET RAILWAYS. 55 

As stated at the outset, no particular effort has been made to 
ascertain accurately the precise nature of the depreciation, since my 
examination of the records of the Chicago City Railway Company 
commences practically at January i, 1881, on which date is re- 
corded the first disbursement on account of the first section of 
cable road built in Chicago, viz. : that on State St. north of 39th St. 
Two years later, or in January, 1883, the final entry of cost is made 
in the books. 1 

In constructing the line on State street, it was necessary to tear 
up and destroy 8.597 miles horse road then existing, and on Wabash 
and Cottage Grove avenues and on 226. St. from State St. to Cot- 
tage Grove Ave. 8.837 miles of additional single track horse road, 
making a total of 17.434 miles single track horse road destroyed, 
the original cost of which is still carried on the books to represent 
an asset, and thus constitute part of the present surplus of the com- 
pany. 

In addition to the horse road converted into cable road on State 
street north of 39th street, 500 feet of brand new cable road was 
built on State street from 300 feet north to 200 feet south of 39th 
street, 1,350 feet on Wabash avenue from Madison street to Lake 
street, and 450 feet on Lake street from State street to Wabash 
avenue, a total of 0.436 miles single track entirely new road, mak- 
ing the total mileage of the first State street cable line 9.033 miles 
single track. 

There was also built 150 feet of single track new cable road 
on Cottage Grove Ave. south of 39th street, making a total mileage 
of the Wabash and Cottage Grove Ave. line 8.865 miles single 
track. 

From the records I find the general character of the road de- 
scribed as follows: 

^hese dates do not fairly indicate the time consumed in the construction of the 
road, as may be inferred from the official report of the president of the road to the 
stockholders at their meeting in January, 1882, wherein it is stated that "work on 
the State street cable road commenced June 27, 1881, but was delayed by sewerage 
improvements made by the city till about the middle of August. By the middle of 
December, 1881, nine miles of single track were constructed." 

At the stockholders' meeting the following year, he stated that "cars com- 
menced running January 28, 1882, between 21st St. and Madison St., and a few 
days after that to 39th St. and also around the eight blocks north of Madison St., 
commonly known as the loop." 

The first payment for labor on account of the Wabash and Cottage Grove 
Avenue cable lines north of 39th St. was in February, 1882, and the last i» 
May, 1883. 



56 MUNICIPAL AFFAIRS. 

"The track is supported by heavy yokes made of 4x4 T-iron placed four feet 
apart and the slot is formed by parallel bars of Z-shaped iron iron weighing 600 lbs. 
to the yard — the whole iron frame-work thoroughly braced and bolted — is sur- 
rounded by a heavy and substantial body of concrete, made with the best English 
Portland cement." 

Ex-President Holmes furnishes the following further descrip- 
tion: 

"The construction consists of an underground tube, through which the cable, 
supported by grooved pulleys, passes in constant motion, etc. The tube is provided 
with sewer connections for drainage and an open slot on the top, through which 
passes a grappling device etc. The metal used for lining the grip performs 2,000 
miles of service, when it requires renewal, etc. More power is required during a 
snowstorm, but in ordinary conditions the operation of 20% miles of cable in 
Chicago has required 477 horse power, of which 389 was used in moving the 
machinery and cables and 88 to move the 240 cars." 

In the construction of the 9.033 miles single track section on 

State street the following material was used: 

Iron lbs. 8,000,000 

Bolts 250,000 

Wagon loads of gravel, sand, stone, etc 50,000 

Cement j English bbls. 13,000 

{ American 12,000 

Cords rubble stone 350 

Brick 214,000 

The cost in detail was : 

1,002 tons steel rails, 63 lbs. to yd., at $27.41 $27,465.77 

11,015 iron yokes, at $9.14 each 100,669.38 

300,000 feet lumber, at $18.53 per M 5,559-38 

Castings, hardware, etc 223,697.44 

Cement, gravel, sand, rubble, grading, labor, etc 153,941.23 

Teaming and freight 7,149-59 

Total $518,482.79 

Strictly speaking, this was the total cost of the 9.033 miles sin- 
gle track belonging tothe State street line. The total cost of the 
8.865 miles single track line on Wabash avenue and Cottage Grove 
avenue was $696,857.46. The cost per mile on State street was 
$57,398.74, and on Wabash and Cottage Grove avenues $78,856.79, 
an increase of 33.49 per cent. 

The details of the cost of the latter line were not scrutinized as 
closely as those for the State St. line, but apparently the per cent, 
of increase was practically uniform in all particulars. This may be 
inferred from the following comparison of material used in the con- 
struction : 



CHICAGO STREET RAILWAYS. 57 



■State St. ^ ( Wabash Ave.- 



Material. 9.033 miles. Per mile. 8.865 miles. Per mile. 

Iron lbs. 8,000,000 885,000 9,000,000 1,016,000 

Bolts 250,000 29,000 275,000 31,000 

Wagon loads of gravel, etc 50,000 5,500 60,000 7,000 

English cement 13.000 1400 15,000 1,700 

American cement 12,000 1,300 2,000 230 

Cords rubble 35° 40 550 62 

Brick 214,000 23,700 230,000 26,000 

The cost of granite paving, which is not included in the above 
total, was for the State street line, 42,395 square yards at $2.51, 
$106,402.91; Wabash and Cottage Grove avenues, 41,475 square 
yards at $3.59 per square yard, $149,125.11, an increase of 43 per 
cent. 

Adding the cost of street paving to the previous totals, we have 
the following: 

Sections. Total cost. Cost per mile. 

State Street $624,885.70 $69,178.09 

Wabash and Cottage Grove Ave 845,982.57 95,731.98 

17.898 miles single track $1,470,868.27 $82,180.60 

Only one power house, with its necessary appurtenances and 
machinery, was constructed to operate the two sections of cable 
road described, the cost of which was as follows : 

21 st St. power house, engine foundations and smokestack $52,214.35 

Engines and boilers, 4 automatic cut-off engines of 250 h. p. each, 4 steam 

boilers aggregating 1,000 h. p 55.153-03 

Cable machinery 38,633.27 



Total $146,000.65 

To this should be added expenditures on the power house building in 1880. 23,998.36 



Total cost of power plant $169,999.01 

This does not include the cost of land on which the power house 
stands. 

The total cost of the entire system was $1,640,867.28, or at the 
rate of $91,678.81 per mile of single track. 

The total cost, according to the books, of the State street road- 
bed and conduit was $910,034.41, instead of $624,885.70, as stated 
above, an excess og $285,148.71 ; and the cost of the other roadbed 
and conduit $858,634.24, instead of $845,982.57, as stated above, an 
excess of $12,651.67. This is due to the following items, which I 
find included in the cost on the books : 



58 MUNICIPAL AFFAIRS. 

Printing, stationery, telegrams and expenses of that character $2,484.98 

Patents 16,333.00 

Legal expenses 2,894.05 

License fees 3,000.00 

Interest on bonds 3,735-57 

Cable (only part of the cost) 7,022.76 

C. B. Holmes, State St. line $249,678.35 

Wabash Ave. line 12,651.67 

262,330.02 

Total $297,800.38 

None of these disbursements have any immediate connection 
with the cost of the roadbed proper, although legitimate charges 
to "Construction" account, with possibly the exception of the sum 
paid or charged to C. B. Holmes, about which nothing seems to be 
known, as the details are not on record. 

It appears that the building of the first section of cable road 
"was accomplished in the face of opposition and uncertainty which 
would have staggered men of less energy and pluck," and that "a 
large and powerful element among the citizens of Chicago was 
openly opposed to the change. Some of the newspapers ridiculed 
and attacked the company in every way possible." 

This is the testimony of Mr. Holmes himself, and it suggests 
at once that possibly some of the money charged to his account 
above may have gone to quiet this opposition in a measure. Such 
expenses are not always inseparable from street railroad construc- 
tion, especially new extensions ; in fact, this report shows large pay- 
ments of this nature by all the companies examined, and for 
changes of a less radical character than the one mentioned above. 
It would therefore be remarkable if no such expense was incurred in 
connection with the introduction of the first cable road into Chi- 
cago, and as there is no other item or division of the total expense 
into which such disbursements could be covered except the $262,- 
330.02 above referred to, it is not improbable that they are there. 
There is nothing, however, on record either to prove or disprove it. 

There were other unusual expenses, but of a different character, 
incurred in the construction of the first sections of cable road on 
State street, which were not repeated in subsequent extensions of 
the system, all of which, allowing for difference in structure, would 
seem to show that a fair estimate of the cost of such sections of 
cable road as were subsequently built on the North and West Side 



CHICAGO STREET RAILWAYS. 59 

roads, the actual cost of which is not shown by the books of the 
companies, can not greatly exceed the cost of the first two sections 
of road built on the South Side. 1 

Sec. 3. — Cost of Cable Roads Compared. 

All of these circumstances, together with the fact that the con- 
struction of the section of cable road referred to was essentially ex- 
perimental, necessarily involved exceptional expenditures not dupli- 
cated in sections of cable road subsequently built, the cost of which, 
compared with that of the first section, brings out clearly the ex- 
cessive cost of the first two sections built on the South Side. 

On the other hand, in using this cost as a basis for estimating 
the cost of the first sections of cable road built on the North and 
West Sides, allowance must be made for any differences in physical 
structure of the roads. In lieu of the construction accounts, access 
to which, as elsewhere explained in this report, has been denied me, 
I have made diligent efforts to obtain copies of the specifications 
under which all of the different roads were built, for the purpose of 
comparison, but without success. 

The brief description of the South Side cable system already 
given, together with the actual cost, as shown by the books of the 
Chicago City Railway Company, will afford an approximate basis 
for estimating the cost of the North and West Side systems; at 
least, the difference in cost may be approximated by comparing the 
above mentioned description with that given of the North and West 
Side systems in the semi-official publication entitled "A History of 
the Yerkes System of Street Railways in the City of Chicago," 
to-wit : 

"San Francisco was the first city to make a successful trial of this plan of 
transportation. Chicago was next to adopt the cable for her South Side railway. 

*For example complaints are uniformly made in the case of each company of 
encountering beds of quicksand and the pipes of the water, gas and sewer systems, 
and that in some instances these systems had to be entirely rebuilt at the expense 
of the companies. In addition, on the South Side the claim is especially made that 
"for a mile and a half south of 12th street, on State street, an average fill of three 
feet was necessary and the balance of the way from one to two feet of excavation 
was necessary to secure the proper grade." 

In the annual report to the stockholders in January, 1882, it is stated that "as 
nearly as can be computed, there has been expended on the street and in machinery, 
foundations and buildings fully $150,000 for the benefit of other lines, that is, the 
sum might have been saved had the company no expectation of ever operating any 
other lines than State street." The difficulty of obtaining granite blocks is also 
referred to as follows: "To get sufficient paving blocks it was necessary to purchase 
from two quarries in Wisconsin, one in Maine, three in Massachusetts, one in Mary- 
land, one in Virginia and three in New York." 



60 MUNICIPAL AFFAIRS. 

Then came Philadelphia. When the North Chicago system was under considera- 
tion by Philadelphia capitalists, it was natural that they should pattern rather 
closely after the most approved methods of cable railway construction in existence. 
In general it may be said that the North and West Chicago cable railway is the 
Philadelphia system with improvements added. The Philadelphia conduit consists 
of a tube of sheet iron 1-8 inch thick and 4 feet S Z A inches in length, bent into a 
particular shape. The tube is supported by, and bolted to, iron yokes placed 4 
feet 6 inches apart between centers. The yokes rest on beds of concrete about 6 
inches deep, and there is a concrete filling around the tubes between the yokes. 
To the yokes are bolted the slots and rails which are of steel and peculiar cross 
section. The slot is bolted to the shoulder of the yoke. Each rail and slot is 31 
feet in length. At every 31 feet 6 inches there is a single manhole, one side of 
which is similar to one-half of a yoke, the other side being of special design. 
Within the manhole, 5 inches below the conduit proper, and on each side of the 
manhole, there is a projecting shelf upon which are bolted two channel bars. 
These channel bars are placed on one flange with the flange extending away from 
the center line of the conduit, and run parallel to this line. Upon these are bolted 
the pulley and its attachments, over which runs the cable. At every square there 
is a double manhole or 'grip hatch,' so called, which extends on both sides of the 
conduit proper, and is essentially a single manhole on each side of the center line 
of the conduit. These manholes lie between the track and the slot. The ends of 
the manholes take the places of two yokes, supporting the tubes. To these yokes 
are bolted the sides and bottom — sheet-iron plates — thus forming a hollow square 
enclosure. Each hole is furnished with a lifting door large enough to allow the 
passage of one man. 

"Running the entire length of the line, and below the conduit, is a nine-inch 
terra cotta pipe for drainage. This pipe connects with the sewer at the foot of 
the grades." 

The most noticeable difference between the two systems, as 
shown by the respective descriptions, is that the concrete conduit 
of the North and West Chicago roads is lined with sheet iron £ inch 
thick, whereas this lining is entirely absent from the concrete con- 
duit of the South Side road, in the construction of which a wooden 
frame was used about which the concrete was packed and the frame 
afterward withdrawn, while the iron lining in the former case was 
intended not only to be a fixture, but at the same time to serve the 
purpose of a frame or mold about which to pack the cement. 

Another noticeable difference is the absence of any wood or 
lumber in structure of the North and West Chicago roads, whereas 
300,000 feet of lumber was used in the construction of the 9.033 
miles single track road constituting the first section of cable road 
built on the South Side. All of this wood was removed, however, 
in 1887, having been used for stringers under the rails. 

At the same time, new steel rails, weighing 70 pounds to the 
yard, were laid, the entire cost of reconstruction being $53,642.65, 



CHICAGO STREET RAILWAYS. 61 

of which sum $34,378.62 represented the cost of taking up and re- 
laying the track and $19,264.03, or 45.44 cents per square yard, the 
cost of relaying the granite pavement. 

By this change in the structure of the South Side road the 
physical characters of the two cable systems are brought closer to- 
gether and afford a better basis for estimating the unknown cost of 
one by comparison with the known cost of the other. 

Sec. 4* — Construction Expenses in Detail. 

The cost of the cables used in operating the first two sections 
of 17.893 miles single track road on the South Side was $27,779.44, 
or at the rate of 26 cents per foot. x 

For the first two sections of cable road built on the South Side 
there were constructed 102 grip-cars at a cost of $102,845.55, or an 
average of $1,008.29 each, fifty of which were for use on the Wabash 
and Cottage Grove avenue line and the remainder on the State 
street line. * The same number of grips were also made at a total 
cost of $12,465.22, or $122.21 each, and for use on the two roads in 
the same proportion. 

There was apparently no increase in the number of passenger 
cars during 1881 ; at least, no increase was occasioned by the open- 
ing of the cable line on State street in January of the following 
year, but by the end of 1882 "fifty new large and handsome passen- 
ger cars, at a cost of $73,771.00, or $1,475.42 each," were added to 
the rolling stock of the company. 

On May 21, 1887, an extension of the cable road on State street, 
from 39th street to 63d street, was completed and in operation, and 
on November 21, 1887, an extension of the cable road on Cottage 
Grove avenue, from 39th street to 67th street, and on 55th street 
from Cottage Grove avenue to Lake avenue, including a loop at 
Jackson Park, was also completed and in operation. 

The construction of the State street extension involved the tear- 
ing up and destruction of 0.256 mile single track horse road built 
prior to December 31, 1880, and 5.744 miles single track new horse 

x These were Swedes steel cables, the tensile strength of which is 78,000 lbs., as 
against 54,000 lbs., for iron cable at 23 cents, per foot. 

2 The cost of the grip-cars differed materially, the first one built costing $777.16, 
the second, $973; the next forty, $687.15, and the remainder at a figure which 
brought the average of the entire lot up to $1,008.29, as before stated. 



62 MUNICIPAL AFFAIR8. 

road built subsequent to that date and contemporaneous with the 
introduction of the first section of cable road on State street, 
making a total of six miles single track new cable road built at the 
cost of $330,040.82, including granite paving, or at the rate of 
$55,006.80 per mile single track. 

The extension on Cottage Grove avenue and 55th street neces- 
sitated the tearing up of 3.125 miles single track horse road built 
prior to December 31, 1880, and 0.126 mile single track horse road 
built subsequent to that date. It also involved the construction of 
three miles single track, entire new track, or the conversion of the 
single track line on Cottage Grove avenue from 39th street to 55th 
street, from Cottage Grove avenue to Lake avenue, into a double 
track road, and three miles single track entirely new road on Cot- 
tage Grove avenue south of 55th street to 67th street, and 0.436 
mile single track entirely new road for the loop at Jackson Park, 
making altogether 9.687 miles single track new cable road exten- 
sion, at a cost of $575,408.63, including granite paving, or at the 
rate of $59,400.09 per mile single track. 

Partly in anticipation of the opening of the extension on State 
street, and partly owing to the growing traffic on the line north of 
39th street, it became necessary to install two new 500 horse power 
engines and two new 500 horse power boilers at the power house at 
2 1 st street and State street, and to transfer the four original smaller 
ones for the use of the extension south of 39th street. The cost of 
installing the new engines was $44,139.17 and boilers $20,292.44. 
There was also expended on the 21st street power house $11,488.56. 
Subsequently two more 500 horse power engines were installed at 
the 2 1 st street power house at an additional cost of $11,000. By 
these changes the 17.898 miles of road north of 39th street were 
operated by four engines, aggregating 2,000 horse power, or in 
horse power per mile, and the six miles of road south of 39th street 

by four engines, aggregating 1,000 horse power, or 167 horse power 
per mile. 

The entire cost of the six miles single track extension south of 
39th street was $494,210, including power house, engines, boilers, 
cable machinery, granite paving, etc., or at the rate of $82,368.33 
per mile single track, and the corresponding cost of the Hyde Park 
extension (9.687 miles single track) was $842,038.11, or at the rate 



CHICAGO STREET RAILWAYS. 63 

of $86,924.54 per mile single track. For this section of road a 
power house with all necessary machinery was erected on Cottage 
Grove avenue and 55th street, including three 500 horse power 
boilers and two engines of 1,000 horse power capacity each. 

During 1890 the cable line on Cottage Grove avenue was still 
further extended south from 67th street to 211 feet south of 71st 
street, an additional 1.08 miles single track to the system at a cost 
of $64,152.10, and the same year additional engines were installed 
in the 55th street power house at an expense of $26,500. New im- 
provements were also made to the cable machinery at the 21st 
street power house, at a cost of about $40,226.80. 

In 1892 the new downtown loop was built for the Wabash ave- 
nue line, which had heretofore been using the same loop as the 
State street line. The new loop was built on Wabash and Michigan 
avenues, from Madison to Randolph streets, and on Madison and 
Randolph streets from Wabash avenue to Michigan avenue, thus 
adding 0.501 mile single track to the Wabash avenue cable line. 
The cost of this loop was $58,465.97. 

In the construction of that part from Randolph street to Madi- 
son street on Wabash avenue, it became necessary to move the 
existing cable track between these points, then forming part of the 
joint loop on State, Lake and Madison streets and Wabash avenue, 
from the center of Wabash avenue to the west side of the center 
line, in order to make room for the new track, thus increasing the 
amount of road to be built to 0.667 m ^ e single track, so that the 
rate of cost per mile was $87,655.02. 

No new granite blocks were required for the paving, the old 
granite paving being relaid. From the best information I can ob- 
tain, the average cost of labor per square yard for laying granite 
block is $0.46, and as there were 3,131 square yards of paving done, 
the cost, if deducted from the total $58,465.97, would leave $57,- 
025.71 to represent the total cost of the section of cable road re- 
ferred to, or at the rate of $85,495.82 per mile of single track. 

As the cost of the last section of cable road built two years pre- 
vious was $59,400.09 per mile single track, exclusive of paving, the 
increase in cost for the loop was at the rate of $26,095.73, or 43.93 
per cent, per mile single track. 



64 MUNICIPAL AFFAIRS. 

This increased cost for road of precisely the same physical char- 
acter as that previously built was undoubtedly due to greater ob- 
structions encountered in the streets in the business district than 
were met with in streets more remote. * 

Reference has been made to the fact that in 1887 all the wood 
originally contained in the section of cable road on State street 
north of 39th street was entirely removed, and at the same time new 
70-pound steel rails laid, at a total cost of $53,642.65. The same 
improvement was made in the 8.865 miles single track road on 
Wabash and Cottage Grove avenues north of 39th street, the same 
year, at a total cost of $53,701.80, of which sum $35,852.16 repre- 
sented the taking up and relaying of the track, etc., and $17,849.64, 
or 42.90 cents per square yard, the cost of relaying the old granite 
pavement. 

Including all the improvements enumerated, the 35.166 miles 
single track cable road cost in the aggregate $2,606,280.24, or an 
average of $74,113.64 per mile single track, and the aggregate cost 
of the power plants, including power houses, engines, boilers, cable 
machinery, etc., $754,444.64, or a grand total of $3,360,724.88, or 
$95,570.30 for the completely equipped and operative system, ex- 
clusive of rolling stock and cable. 

Sec. 5. — Cost of Trolley Lines. 

Between December 31, 1880, and December 31, 1892, 104.545 
miles single track horse railroad was built, of which 5.870 miles 
single track was converted into cable road as already stated. Of 
the remainder, there still exists 4.818 miles single track, 2.752 miles 
single track have been transferred or leased to other companies, 
1.003 miles single track have been torn up and abandoned, and 
90.102 miles single track have been converted into trolley road. 

Elsewhere in this report it will be found that in the construction of the State 
street loop extension of the West Chicago Street Railroad, built about the same 
time as the Michigan avenue loop, almost the same ratio of increase occurs in the 
cost over that of the Blue Island Avenue, Halsted and Van Buren Street line. For 
example, the cost of the latter line per mile was $96,455.43 and of the State street 
loop extension, $139,221.37 per mile, both single track, snowing an increase of 44.34 
per cent., or a slight difference in the rate of increase in the Michigan avenue loop 
and other South Side cable roads. 

There is reason to believe that the obstructions encountered were not so great 
in the case of the Michigan avenue loop as in the case of the West Chicago loop, 
the district covered being less of a business center. In any event, the comparison 
is valuable in that it seems to indicate clearly that whatever structural difference* 
there may be in the two systems of roadbed, the extreme difference in cost does 
not average more than $40,000 per mile, single track. 



CHICAGO STREET RAILWAYS. 65 

The introduction of electric power occurred in 1892. During 

that and the following year 30.261 miles single track electric road 

was built, at an expenditure of $519,392.15, or an average of $17,- 

185.17 per mile. This average, however, is not a safe basis for 

estimating the cost of a mile of trolley road, as may be inferred from 

the following detailed schedule of the different sections of road built 

and the actual cost thereof, viz. : 

On 47th Street, from — Miles, S. T. Total Cost. Cost p. Mile. 

Kedzie Ave. to Leavitt St 2.5 $30,755.72 $12,302.29 

Leavitt St. to Paulina St 1.25 27,111.20 21,688.96 

Paulina St. to Ashland Ave 0.25 4,248.91 16,995.64 

State St. to Cottage Grove Ave 2. 41,404.60 20,702.30 

Cottage Grove Ave. to Drexel Boulevard... 0.302 6,356.38 21,047.62 

Drexel Boulevard to Lake Ave 1.248 19,298.59 15,463.61 

Ashland Ave. to Halsted St 2. 22,631.27 11,315.64 

Halsted St. to State St 2. 24,604.61 12,302.31 

On 63d Street, from — 

Ashland Ave. to Center Ave 1. 19,401.19 19,401.19 

Center Ave. to Wentworth Ave ) 3-936 83,752.22 21,278.52 

Cottage Grove Ave. to 111. Cent. R. R.. . . j 

Grace, 62d, 64th and Stony Island loop 0.709 7,731-79 10,905.20 

Illinois Central R. R. to Stony Island Ave. 0.564 12,010.09 21,294.50 

Kedzie Ave. to Central Park Ave z. 11,891.86 11,891.86 

On 61 st Street, from — 

State St. to Wabash Ave 0.15 2,487.78 16,585.20 

Wabash Ave. to South Park Court 1 3.674 53,967.59 14,689.06 

South Park Court to 60th St ) 

Wentworth Ave. to State St 0.5 ZO,8n.93 21,623.86 

On 35th Street, from — 

State St. to Ullman St 3.178 67,287.22 21,162.30 

Ullman St. to California Ave 4. 65,841.96 16,460.49 

Subsequently this line was extended from — 

State St. to Michigan Ave 0.163 3,449-45 21,162.30 

Connection was also made between 61 st and 63d streets on 

Cottage Grove avenue and on State street from 61 st to 61 st street 

viaduct, and on Wentworth from 61 st street viaduct to 63d street, 

a distance of one mile, single track, at a cost of $7,797.24, making a 

total cost, including the extension on 35th street, of $522,841.60, 

and an average per mile of $17,585.17. 

No extensions of this character of road were made in 1894, but 
during the following three years a total of 1 11.93 miles single track 
trolley road were built at an expenditure of $2,335,341.44, or an 
average of $20,953.64 per mile of single track. 

As before stated, this average is misleading, as the same varia- 
tion in cost of different sections of road composing the n 1.93 miles 
occur as in the foregoing schedule. This variation is not due to 
any economy in construction of roads built under the same specifi- 



66 MUNICIPAL AFFAIRS. 

cations, but to difference in the character of pavement, weight of 

rails laid, in some cases to the absence of any pavement at all and in 

others to the relaying of the old pavement, the first cost of which 

had already gone into construction account. Furthermore, the 

first trolley poles erected were wooden, whereas those subsequently 

erected were made of iron, which improvement with others in the 

overhead system increased the cost of overhead construction ma* 

terially, as will be seen by the following scredule, viz. : 

Line. Miles, S. T. Overhead Cost. Cost p. Mile. 

47th St 11.55 $20,600.57 $1,783.60 

6i-63d Sts 12.533 38,638.56 3,082.95 

35th St 7-341 32,714-24 4,456.38 

29th St 170 684.30 4,025.30 

Total 111.76 $616,175.66 $5,51540 

The variation in cost of the underground work was naturally 
not so marked, although improvements occurred in that depart- 
ment, as will be seen by the following schedule of the cost, viz. : 

Line. Miles, S. T. Overhead Cost. Cost p. Mile. 

47th St 11.55 $15,414.42 $1,346.00 

6i-63d Sts 12.533 20,082.66 1,002.40 

35th St 7-341 8,178.56 1,114.09 

29th St 170 171.08 1,006.40 

Total 111.76 $198,905.68 $1,77971 

The cost of the rails laid on portions of the road was double that 
for other portions. The following schedule shows the weight per 
yard of the rails laid, the mileage and the cost, viz. : 

Weight per yd. Miles, S. T. Total Cost. Cost p. Mile. 

45 lbs 1.5 $3,329-97 $2,219.98 

63 lbs 45407 141,123.59 3,107.97 

70 lbs 302 1,042.90 3,453.30 

72 lbs 2.5 8,879.85 3,551.94 

83 lbs 74.978 306,937.40 4,094-62 

90 lbs. 17.667 78,440.60 4.439-95 

Total 142.354 $539,754.31 

The cost per ton taken is uniformly $28.03, tne cost °f tne most 
recent purchases. If the exact cost of the different quantities of the 
same weight purchased at different periods were taken no satisfac- 
tory comparison could be made of the total cost of different sections 
built at different periods. For the same reason the following 
schedule of the cost of the street paving is based uniformly upon the 
average cost per square yard of the different kinds of pavement, to- 
wit : Granite, $2 ; cedar block, $1 ; macadam, 60 cents, and vitrified 
brick, $1.60. 



CHICAGO STREET RAILWAYS. 67 

Pavement. Miles, S. T. Total Cost. Cost p. Mile. 

Granite 78.085 $740,710.38 $9,986.66 

Wood 28.326 132,945.27 4,693-33 

Macadam 11. 163 31,435.01 2,816.00 

Brick 8.5 63,829.31 7,509-33 

Dirt 1538 

Total 142.354 $968,9i9-97 

The cost of the miscellaneous material and labor entering into 

the total cost of the roadbed was as follows : 

Line. Miles, S. T. Total Cost. Cost p. Mile. 

47th St 11.55 $58,783.55 $5,089.80 

6i-63d Sts 11-533 39,001.54 3,382.60 

35th St 7.341 i5,493-o6 2,110.50 

29th St 0.170 105.60 621.18 

Miscellaneous 111.76 568,801.41 5,089.50 

Total 142,354 $682,185.16 

As already stated, certain sections of the road converted from 
horse to electric road were already paved with granite block, which 
did not warrant the laying of new pavement. This pavement was 
therefore relaid when the change was made, and thus its first cost 
necessarily became incorporated into the cost value of the new road. 
The original cost was $284,242.13, which, if added to the actual ex- 
penditures between 1892 and 1897 inclusive, to-wit: $2,858,183.04, 
make the total cost value of the 142.354 miles single track electric 
road $3,142,425.17, divided as follows: 

Line. Miles, S. T. Total Cost. Avg. p. Mile. 

47th St 11.55 $213,957.94 $18,524.50 

6i-63d Sts H-533 209,851.69 11,195.76 

35th St 7-341 136,578.63 18,604.91 

29th St 0.12P 3,252.80 19,134.12 

Miscellaneous 111.76 2,578,784.11 23,074.30 

Total 142.354 $3,142,425.17 

The total cost of the electric portion of the road was as follows : 

Line. Miles, S. T. 

47th St 11.55 $36,014.99 $3,118.18 

6i-03d Sts I2.533 1 58,721.22 4,685.33 

35th St 7-341 40,892.80 5,570.47 

29th St 0.170 855.38 5,031.65 

Miscellaneous 111.76 815,081.34 7,293.14 

Total 143354 $951,565.73 

*It will be noticed that the mileage on 61 -63d Sts. in the last schedule is one 
mile greater than in the previous ones. This is on account of the fact that the 
trolley wires on Cottage Grove avenue from 61 st to 63d street are built over the 
cable track, the cost of which is included in the cable system. The case is the same 
on State street from 61 st street to 61 st street viaduct. The roadbed on Went worth 
avenue from the 61 st street viaduct to 63d street is also included in the general cost 
of the entire road on Wentworth avenue. 



68 MUNICIPAL AFFAIRS. 

Independent of the electric portion of the road, the actual cost 
of the roadbed was as follows : 

Line. Miles, S. T. Total Cost Avg. p. Mile. 

47th St 11.55 $177,942.95 $15,406.32 

6i-63d Sts 11.533 151,130.47 13,105.05 

35th St 7.341 95,685.83 13,034.44 

29th St 0.170 2,397.42 14,102.47 

Miscellaneous 111.76 1,763,702.77 15,781.17 

Total 142,354 $2,190,859.44 

The total cost of the roadbed is subdivided as follows : 

Miles, S. T. Material and Labor. Total Cost. Av. p. Mile. 

142.354 Steel rails $539,754-31 $3,791-64 

142.354 Pavement 968,919.97 6,806.40 

142.354 Miscellaneous matter and labor 682,185.16 4,792.20 

Total $2,190,859.44 

The total cost of the electric portion is subdivided as follows : 

Miles, S.T. What for. Total Cost. Avg. p. Mile. 

143,354 Overhead $708,813.33 $4,944.50 

143,354 Underground 242,752.40 1,693.40 

Total $951,56573 

Referring to the first schedule, it will be noticed that the sec- 
tions of road on 47th street from Leavitt to Paulina ; on 63d street 
from Cottage Grove avenue to Stony Island avenue and from Went- 
worth avenue to Center avenue and on 35th street from State street 
to Ullman street, an aggregate of 8.928 miles out of the total 30.261 
miles single track electric road built in 1892-93, cost about the same 
per mile to build. Each of these sections was built after the same 
specifications. Each is paved with granite block and each of the 
rails weigh 83 pounds to the yard. The other items of cost like- 
wise correspond. As nearly 56 per cent, of the total electric mile- 
age is composed of road of this character, its actual cost would 
seem to afford a better basis for computations than the general 
average of roads of irregular description. 

The sections referred to cost $21,298.36 per mile single track, 
divided as follows : 

Paving $9,386.66 

Rails 4,09462 

Miscellaneous material and labor 3,036.09 

Total cost for roadbed $16,517.37 

Electric construction 4,780.99 

Total $21,298.36 

The items of paving and electrical construction include the cost of labor. The 
labor of laying the rails is included in the items of miscellaneous material and labor. 



CHICAGO STREET RAILWAYS. 69 

During 1895-6-7 thirty-four and a half miles single track road of 

precisely similar description was built, at an average cost, however, 

of $25,863.89 per mile, divided as follows: 

Paving $9,386.66 

Rails 4,094.62 

Miscellaneous material and labor 5,089.50 

Total for roadbed $18,570.78 

Electrical construction 7,293.11 

Total $25,863.89 

The engineers of the company estimate that the same road can 
be built to-day for $18,077.85 per mile single track, divided as 
follows : 

Paving $9,386.66 

Rails 4,094.62 

Miscellaneous material and labor 2,680.21 

Total for roadbed $16,161.49 

Overhead material 1,270.41 

Overhead labor 170.34 

Underground material 370.80 

Underground labor 104.81 

Total $18,077.85 

Sec. 6. — Present Assets and Liabilities. 

The cost value of the existing cable, electric and horse railroad 

of the company on December 31, 1897, is as follows: 

35.166 miles S. T. cable road at $74,113.64 $2,606,280.24 

142.354 miles S. T. electric road at $22,074.72 3,142,425.17 

.256 miles S. T. horse road at $22,946.14 5,873.31 

2.818 miles S. T. horse road at $24,995.73 70,427.96 

2. miles S. T. horse road at $14,720.08 29,440.16 

182.594 miles $5,854,446.84 

To this should be added the cost value of road leased to other companies 170,000.00 
Also amount paid to the 111. Cent. R. R. Co. for proportionate cost of 

raising tracks and building subway at 63d St. and 111. Cent. R. R. 

right of way 60,590.92 

Total $6,085,037.76 

Deducting this total from the balance carried on the books of 
the company to the debit of construction account, shows a depre- 
ciation of $4,811,565.05 carried in that account properly chargeable 
to profit and loss. 



70 MUNICIPAL AFFAIRS. 

The real estate or land owned by the company on December 31, 
1880, just before the introduction of the cable system, cost 
$234,423.63. 

Between that date and December 31, 1885, during which period 
the first two sections of cable road north of 39th street were built, 
and just before the extension of those lines south of 39th street, 
there was expended for land $40,500.10, and between December 
31, 1885, and December 31, 1892, or the year prior to the operation 
of the lines, there was expended $160,387.67 for additional land, 
part for the enlargement of car barns, shops, etc., due to the in- 
creased traffic arising from the extension of the cable lines and 
partly for land upon which to erect two new cable power houses for 
the new extensions. 

Between December 31, 1892, and December 31, 1897, $49,- 
584.39 was paid out for additional land, principally for a site for the 
new electric power houses at Oakley avenue and Leavitt street, be- 
tween 48th and 49th streets, and on State street and 52d street. 

The buildings owned by the company on December 31, 1880, 
cost $202,472.75. Directly and indirectly the construction of the 
first two sections of cable road north of 39th street occasioned a 
further expenditure of $167,568.83 for improvements of this char- 
acter. Between December 31, 1885, and December 31, 1892, $761,- 
53 I -33 was P a id out for extensive improvements in the buildings of 
the company generally and particularly for the erection of two new 
cable power houses for the extensions south of 39th street. 

The introduction of the trolley system in 1893 necessitated the 
construction of the two new electric power houses already referred 
to at a joint cost of $241,356.09, exclusive of machinery. Miscel- 
laneous improvements costing $135,537.71 were also made in other 
buildings prior to December 31, 1897. 

The cable machinery for the first two sections of road north of 
39th street cost $137,925.47 up to December 31, 1885, and together 
with the extensions south of 39th street $460,984.32 additional by 
December 31, 1892, making a total of $598,909.79 for cable ma- 
chinery. For the five years succeeding December 31, 1892, $23,- 
394.11 in improvements were made to the machinery. 

Trie total cost of electrical machinery up to December 31, 1897, 
was $586,549.31. 



CHICAGO STREET RAILWAYS. 71 

The two electric power houses, including machinery, but ex- 
cluding land, cost $827,905.40, divided as follows : Oakley avenue, 
$392,462.99; 52d street and State street, $435,442.41. 

The total cost value of all the property of the company on De- 
cember 31, 1897, is shown by the following statement: 

ASSETS. 

Cable road $2,606,280.24 

Electric road 3,142,425.17 

Horse road 105,741.43 

Leased road 170,000.00 

111. Cent. R. R. construction 60,590.92 

$6,085,037.76 

Real Estate— Land $484,895.79 

Buildings 1,508,466.71 

1,993,362.50 

Machinery — Cable $622,303.90 

Electric 586,549.31 

1,208,853.21 

Cable 38,744.46 

Tools, etc 33,126.00 

Office furniture and fixtures 9,247.01 

Storehouse supplies 110,929.09 

Uniforms 570.00 

Auditorium stock (estimated value) 2,500.00 

Chicago Exhibition Co. bonds 10,000.00 

Accounts receivable 16,268.20 

Rolling Stock : 

339 Box Cars, at $900 $305,100.00 

59 Box Cars, at $725 42,775.00 

6 Box Cars, at $650 3,900.00 

417 Open Cars, at $725 302,325.00 

259 Grip Cars, at $650 168,350.00 

390 Box Cars, motors, at $1,000 390,000 

340 Open Cars, motors, at $825 280,500.00 

2 Mail Cars, at $900 1,800.00 

2 Sweepers, at $750 1,500.00 

6 Sweepers, at $500 3,000.00 

5 Sweepers, at $300 1,500.00 

1 Sweeper, at $400 400.00 

61 Snow plows 20,781.60 

$1,521,931 60 

Grips 25,031.84 

Horses 8,270.00 

Cash on hand and in bank 540,088.14 

Total assets $11,603,960.71 

LIABILITIES. 

Capital stock $12,000,000.00 

Bonds 4,619,500.00 

Unpaid coupons 9,580.50 

Unpaid wages 72,402.15 



72 MUNICIPAL AFFAIRS. 

Unpaid bills (audited) 73,599-42 

Deposits 11,855.00 

Accounts payable 65,051.15 

—$16,851,988.22 

Deficit $5,248,027.51 

Sec. 7, — Stocks, Bonds and Dividends* 

The authorized capital stock of this company outstanding Janu- 
ary 1, 1 88 1, was $1,500,000, and for several years prior to that date 
it had remained at the same figure. With the advent of the cable 
system, accompanied by a large increase in traffic and net earnings, 
came a series of enlargements of capital in the form of both stock 
and bonds. 

The first issue of bonds, in reality certificates of indebtedness, 
occurred in 1881, simultaneously with the construction section of 
cable road built on State street. The amount of this issue was 
$750,000, of which $738,600 were sold the same year and the bal- 
ance in subsequent years. 

On July 1, 1882, the capital stock was increased to $2,500,000, 
and on December 1 the same year the bonds authorized were also 
increased to $1,500,000. Reference is made, in the annual report 
to the stockholders, to the new issue of bonds as follows : "Five 
hundred thousand dollars of these bonds were issued to the stock- 
holders at par and the money used in paying a dividend of 20 per 
cent to the stockholders." In other words, the bonds themselves 
were practically given to the stockholders, the transaction being 
essentially a "bond" dividend as distinguished from the common 
"stock" dividend. The 20 per cent, bond dividend was also on the 
full $2,500,000 capital stock. Considering that the new investment 
of $1,000,000 had only been in six months the return was at the rate 
of 50 per cent, per annum. 

Prior to the increase in the stock, two quarterly dividends of 
z\ per cent, each had been paid that year and two more of the same 
rate were subsequently paid on the increased sum. 

But this did not constitute the only profit derived by the in- 
vestor. As the new stock was sold only to the old stockholders at par 
and had a market value of $300 immediately after its issue, the con- 
ditions under which it was sold amounted to the payment of a bonus 
of 200 per cent., or an extra dividend of 133 1-3 per cent on the 
original $1,500,000 of capital. 



CHICAGO STREET RAILWAYS. 73 

As regards the bond dividend, nothing in the financial condition 
of the company at the time, or in its previous history as regards 
dividends and earnings, warranted the payment of so large a divi- 
dend. For five years previous to 1881 the dividend rate had been 
uniformly 10 per cent, and for 1881 it was only 1 per cent, higher. 
Furthermore, the net earnings for 1882 were $364,992.32. Deduct- 
ing the regular quarterly dividends of 1882, aggregating $190,- 
747.50, leaves only $174,244.82 applicable to the $500,000 extra 
dividend, showing that the balance was apparently from the ac- 
cumulation of previous years. But it has already been pointed out 
that the surplus account, according to the books, on December 31, 
1880, was $655,646.84 in excess of what.it should be, and if to this 
is added $355,098.08, the cost value of the 17.434 miles of old horse 
railroad just replaced by cable road, the total sum charged to de- 
preciation would be $1,010,744.92, which would wipe out the $816,- 
897.85 book surplus of December 31, 1881, and $193,847.07 of the 
$364,992.32 surplus earnings for 1882. 

The correct surplus remaining after this adjustment of the ac- 
counts would have been sufficient to pay an average dividend of 
nearly 9 per cent, for the year, so that if the proper sum chargeable 
to depreciation had been marked off even as late as December 31, 
1882, it would have had no material effect on the rate of dividends 
that had been uniformly paid each year, and which apparently gave 
the stock a market value of $300 per share before any series of 
bonus distributions had been introduced. 

Reference has been made on a preceding page to the fact that 
the management had to overcome serious opposition on the part of 
the general public to the introduction of the cable system, and it 
suggests at once the possibility of its being obliged to overcome 
greater opposition among those more directly interested by the 
distribution of the extra 20 per cent, dividend of $500,000, and as 
the current earnings did not warrant it a bond issued was decided 
upon for the purpose. 

On April 10, 1883, the capital stock was again increased $500,- 
000, or to a total of $3,000,000. As in the case of the previous 
issue, the new stock was sold to the old stockholders only, and at 
par, although the market value of the general stock was $300 per 
share before the increase and $270 afterward. The bonus in this 



74 MUNICIPAL AFFAIRS. 

case was 170 per cent, on the par value of the new stock, equivalent 
to an extra dividend of 34 per cent, to the old stockholders on their 
holdings prior to the increase. 

The regular quarterly dividends this year aggregated 11 per 
cent., and from that time down to the present have been 12 per 
cent, per annum. 

In 1885 another issue of bonds, amounting to $1,000,000, was 
authorized. These bonds, like those issued previously, mature 
July 1, 1 901, and bear 4^ per cent, interest. 

In the annual report to the stockholders at the meeting in Janu- 
ary, 1886, reference is made to the new stock and bonds issued since 
1880, as follows: 

"Five years ago the capital stock of the company consisted of $1,500,000.00 and 
was selling at something over $300 per share. Since that time the company has 
grappled with and carried through the most gigantic enterprise ever undertaken 
by any street railway corporation in the world. It has issued and sold an additional 
million and a half stock at par and two and a half millions of bonds, the proceeds 
of which have been expended in a radical revolution of its system." * * * 

During the same year $1,500,000 new bonds were authorized 
and sold to provide funds to extend the cable roads south of 39th 
street, making total bonds outstanding $4,000,000 and capital stock 
$3,000,000. This year it was decided that the bonds should have 
something more substantial than the mere promise of the company 
to pay as security, and accordingly a mortgage or first lien on all 
the property of the company was created and pledged as security 
for the payment of the $4,000,000, principal and interest, the right 
being reserved to increase the total bonds to $6,000,000. 

The following excerpt from the annual report to the stockhold- 
ers in January, 1887, is interesting as showing that it was well 
understood that the property account of the property as it appeared 
on the books was inflated, to-wit: 

"At the beginning of the year the books of the company showed a surplus of 
$628,559.40 which has been accumulated for a number of years, and which, under 
ordinary circumstances, the shareholders would be entitled to have represented by 
bonds or stock and divided pro rata, according to the amount of stock held by each. 

"But when the change was made from horse to cable power, it became necessary 
to dispense with a large amount of old construction, which was contained in the 
property account of the company, and the doing away with that construction would 
necessarily affect the amount of the so-called surplus. The only legal manner of 
determining how much, if any, of that surplus remained, would be by an appraise- 
ment made by duly appointed commissioners, under order of court, with returns 
made into court. Undoubtedly the amount of such appraisement, if now made, based 



CHICAGO STREET RAILWAYS. 75 

as it should be, upon the earning capacity of the road, would exceed by several 
millions of dollars the liabilties of the company, as represented by its capital stock 
and bonds. There are, however, many weighty reasons why no such appraisement 
should be made at the present time, however desirable such a proceeding might be, 
when matters of taxation and other relations of corporate properties are more per- 
manently settled by legislation." * * * 

The report then goes on to describe a plan by which the same 

desired result may be attained without a reappraisement, as follows : 

"In other words, an amount equal to the surplus in '86 has been borrowed at 5 
per cent, to pay for property, and the surplus itself has been loaned to the same 
creditor at the same rate of interest. Hence, whenever it shall be for the interest 
of the company to pay such loan by an issue of stock or bonds, that amount will be 
available for dividends without any appraisement or court proceedings." 

In plain words, by creating a fictitious liability an excuse is af- 
forded for issuing new bonds or stock to take it up, but instead of 
applying the proceeds of the bonds or stock in that manner they are 
diverted toward the payment of dividends and the original condition 
of affairs restored. This proposition is so bald on the face of it as to 
scarcely require comment. It is chiefly remarkable as showing the 
frankness with which the exact situation is explained to the share- 
holders and their apparent ready acquiescence in the scheme pro- 
posed, as I find no record of any protest from that quarter ; on the 
contrary, it has been the practice uniformly at each annual meeting 
of the shareholders to ratify, confirm and approve by specific reso- 
lution all the acts and doings of the management during the pre- 
ceding year, so that there would seem to be no division of responsi- 
bility between the management and the stockholders either on this 
or any other account. Indeed, it would be most remarkable if any 
record could be found of opposition on the part of the shareholders 
to any plan of increasing the dividends whenever proposed by the 
management, however ill concealed the pretext may be, as long as 
any degree of plausibility can be found to support it. It is proper 
to state that the above proposition originated with a former man- 
agement and it may be the ready disposition to thus openly juggle 
with the surplus had some bearing on the subsequent change in 
management, but if such is the fact there is nothing of record to 
indicate it ; furthermore, no apparent effort has ever been made by 
subsequent managements to correct the property account in the 
books or determine the actual surplus of the company, the first step 
toward which would be the marking off of the cost value of the old 



76 MUNICIPAL AFFAIRS, 

horse railroad, scarcely a vestige of which, in any tangible form, 
can now be found, and to that extent the present management is 
equally responsible for the payment of dividends from the, as ex- 
President Holmes rather contemptuously refers to it, "so-called" 
surplus which has been carried on the books as an asset down to 
the present time. 

On April i, 1888, another increase of $1,000,000 in the capital 
stock occurred. As in previous cases, the new stock was sold to old 
stockholders only and at par, each stockholder being privileged to 
purchase such amount as was indicated by his pro rata share of the 
whole stock outstanding previous to April t, 1888. Just previous to 
April 1, 1888, the market value of the $3,000,000 stock then outstand- 
ing was $350 per share, or $10,500,000 in the aggregate. The in- 
crease of $1,000,000 reduced the pro rata mathematical value of each 
share to $263, and as a matter of fact the market quotations within 
a week after April 1, 1888, were $260 per share for the new stock, 
or a premium of $160 over the price paid for it by the old share- 
holders. 

It would be impracticable to show whether or not any of the 
shareholders disposed of the new stock and thus realized the profit 
pointed out, but even if they did not and still held it at the date at 
which this examination is brought down, to-wit., December 31, 
1897, the market price at which the stock could then be disposed of 
was $235 per share, or a fraction off. 

I understand that the privilege of purchasing these new issues of 
stock at par has rarely, if ever, been allowed to lapse by the old 
shareholders, and it would be surprising if the opportunity was al- 
lowed to pass, since the stock has always been good collateral for 
loans, and a stockholder, even if indisposed to increase his invest- 
ment, could easily secure a temporary loan of $100 per share, on 
the security of his old stock, with which to purchase the new shares, 
and after receiving the certificate dispose of it for cash at its en- 
hanced market value, take up his loan of $100, and pocket the pre- 
mium of $160 pointed out in the above case. In such a case the 
premium or bonus received is clearly equivalent to an extra divi- 
dend of 53 1-3 per cent, on the old stock. 

On October 1, 1889, still another increase of $1,000,000 in the 
capital stock occurred under similar conditions. This new issue 



CHICAGO STREET RAILWAYS. 77 

was sold to stockholders of record September 15, 1889. The mar- 
ket price immediately after was $257 per share, the bonus $157 per 
share, or 39J per cent, on the whole stock. 

During 1890 $500,000 new 4J per cent, bonds were issued, pre- 
sumably on account of the Alley "L" road. 

On January 2, 1891, $2,000,000 new stock was authorized sold to 
stockholders of record December 15, 1890, at par. The bonus in 
this case was $165 per share, equivalent to an extra dividend of 
66 2-3 per cent, on the old stock. The same year $120,000 new 4J 
per cent, bonds were issued, making a total of $4,620,000. The 
amount outstanding on January 1, 1898, was $4,619,500. 

On April 1, 1893, $2,000,000 new stock was sold at par to stock- 
holders of record March 15, 1893. Before March 15, 1893, the 
market price was $440 per share and after March 15, 1893, $360 
per share. The bonus in this case aggregated $5,200,000, or 74.29 
per cent, on the $7,000,000 capital then outstanding. 

This was not the only profit that year. In addition to the above, 
the ordinary dividends amounted to $2,100,000. The $3,000,000 
Alley "L" road extension bonds, costing $2,250,000, were also dis- 
tributed pro rata, as well as the $3,885,000 capital stock of the Alley 
"L" road, making a total of $13,435,000, reckoning the extension 
bonds at cost value, or an average profit of nearly 150 per cent, on 
the entire $9,000,000 capital stock in one year. 

On July 1, 1895, another increase of $1,000,000 in the capital 
stock occurred, the new stock being sold to stockholders of record 
of June 15, 1895, at par. The bonus in this case was $185 per share, 
or an extra dividend of 20.55 P er cent, on the old stock. 

Still another increase of $2,000,000 in the capital stock occurred 
in 1896, the new stock being sold to stockholders of record June 15, 
1896, the bonus being $122 per share, equivalent to an extra divi- 
dend of 24.4 per cent, on the old stock. 

In the sixteen years from January 1, 1882, to January 1, 1898, 
the total dividends paid by the company, including the premiums 
on new stock issued, aggregate the enormous sum of $37,602,187.50, 
or an average of 44.63 per cent, per annum. 

Of this sum, $12,657,187.50 represents the regular annual 
dividends of 10 per cent, in 1882, and 12 per cent, each year since, 
also the extra 20 per cent, bond dividend of 1882, and double cash 



78 MUNICIPAL AFFAIRS. 

dividend of 1893. The stock bonuses represent $18,810.00 and the 
Alley "L" road bonds and stock $2,250,000 investment. The extra 
dividend of 1882 amounted to $500,000 and that of 1893 to $870,000. 

The aggregate of the three last named dividends is $3,620,000. 
Even if these had not been paid there is still a deficiency of $1,628,- 
000, which should have been withheld from the stockholders in the 
regular quarterly dividends in order that the proper adjustment in 
the permanent property account of the company might be made 
without showing a deficit in the balance sheet of the company on 
December 31, 1897. 

During the same period the capital stock has been increased 
$10,500,000 and bonds issued amounting to $4,619,500, a total in- 
crease in the permanent indebtedness of the company of $15,119,- 
500. The increase in the book value of the assets has more than 
kept pace, but included in the stock value is $5,248,027.51 properly 
chargeable to depreciation, as already set forth on a preceding page. 

The permanent debt of the company on December 31, 1897, ex- 
clusive of capital stock, was $4,619,500 and the floating debt $232,- 
488.22, making a total of $4,851,988.22. Deducting this from the 
total assets, $11,603,960.71, leaves $6,751,972.49 to represent the 
capital stock of $12,000,000, showing a deficit of $5,248,027.51. 

Sec. 8. — Mileage of South Side Lines. 

CONSTRUCTION. 

Miles, 
S.T. 

Horse road existing December 31, 1880 45-679 

New horse road built since December 31, 1880 104.545 

New cable road built since December 31, 1880 8.481 

New electric road built since December 31, 1880 29.031 

Total 187.736 

Deduct — Horse road torn up 1.901 

Horse road transferred 3.241 

5.142 

Total mileage December 31, 1897 182.594 

RECONSTRUCTION. 

Miles, 

S. T. 

Horse road existing December 31, 1880, afterward converted to cable road... 20.815 

Ditto, electric road 23.221 

New horse road built since December 31, 1880, afterward converted to cable 

road S-870 

Ditto, electric road 90.102 

Total changes 140.008 



CHICAGO STREET RAILWAYS. 79 

Add — Horse road built prior to December 31, 1880, unchanged 2$5 

Horse road built since December 31, 1880, unchanged 4.818 

Cable road built since December 31, 1880 (new mileage) 8.481 

Electric road built since December 31, 1880 (new mileage) 29.031 

Total mileage December 31, 1880 182.594 

From point of view of motive power, the mileage is as follows : 

Cable road 35-i66 miles, S. T. 

Electric road 142-354 miles, S. T. 

Horse road 5.074 miles, S. T. 

Total 182.594 miles, S. T. 

Sec. 9. — Relations with the Elevated Roads. 

It has apparently been the uniform policy of the three principal 
street railway companies in Chicago to pre-empt the territory in 
which they operate respectively, to their sole use, and a mutual 
understanding has been had that each company should confine its 
lines to its own particular territory. So far as the establishment of 
new competing lines is concerned, the geographical formation of 
the city and its division into three distinct sections, bounded by the 
Chicago river and its two branches, seems to aid in this monopoly, 
as practically all the bridges and tunnels connecting the three sec- 
tions referred to, the only avenues of traffic between them, are ab- 
solutely in the control of either of the companies for street railway 
purposes. 

In a report made to the Fidelity Insurance Trust and Safe De- 
posit Co., of Philadelphia, in 1888, by special examiners who came 
to Chicago for the purpose of examining the street railway prop- 
erties of the city, especially those of the North and West sides, par- 
ticular attention is called to these natural obstacles, as it were, to the 
establishment of rival lines, owing to the inability of new roads to 
reach the business portion of the city otherwise than by means of 
the bridges and tunnels referred to, and speaks of the wisdom 
shown by the management of the companies in bringing about a 
contract with the city to repair and maintain in good order the old 
city tunnels and bridges, going so far as to move certain bridges and 
build entirely new ones free from all expense to the city, at the 
only remaining accessible points of communication across the river, 
in return for the exclusive privilege of operating street cars across 
them, as calculated to free the companies from any possibility of 



80 MUNICIPAL AFFAIRS. 

competition and inspire confidence in the permanent value of the 
securities of the companies. 

On the South Side the situation is practically the same, all the 
main thoroughfares into the heart of the business district being in 
the exclusive control of the Chicago City Railway Company, so far 
as street railway transportation is concerned. Under these cir- 
cumstances, the only means of breaking the monopoly was in the 
construction of an elevated railroad over private property. 

On March 10, 1888, Col. A. F. Walcott, of New York, suc- 
ceeded in securing a contract for the construction of an elevated 
road parallel to the two main lines of the Chicago City Railway Co., 
thus threatening the latter company with what appeared to be se- 
rious competition at the time. On March 28 of the same year the 
city council granted permission for the construction of the road 
from Van Buren St. to 39th St., on property to be purchased or 
condemned, adjoining the alley between State St. and Wabash Ave. 
Subsequently permission to extend the road south to 67th St. was 
granted. 

The corporate title of the new company was the Chicago and 
South Side Rapid Transit Railroad Co., and the date of incorpora- 
tion January 4, 1888. The contract for the construction of the 
road secured by Col. Walcott March 10th, 1888, was transferred by 
him May 1, 1888, to the Rapid Transit and Bridge Construction 
Company of New Jersey, organized for that purpose. 

The immense outlay required for the purchase and condemna- 
tion of land had a tendency to greatly discourage the enterprise in 
its incipiency, and the great uncertainty of its ultimate completion 
apparently occasioned very little apprehension on the part of the 
Chicago City Railway Company officials that the new road would 
ever materialize until after one mile of single track road of this de- 
scription had actually been completed early in 1889, from 30th to 
35th streets, adjoining the alley running parallel to and between 
State street and Wabash avenue. 

About this time some of the directors and principal stockholders 
of the Chicago City Railway Co. became satisfied that if the World's 
Fair of 1893 was definitely located at Jackson Park sufficient funds 
would be forthcoming to complete the road to that point as pro- 
jected. Accordingly steps were taken to secure control, and by 



CHICAGO STREET RAILWAYS. 81 

November 26, 1889, an agreement, amended December 10, 1889, 
was entered into between the Chicago City Ry. Co. and the Rapid 
Transit and Bridge Construction Co., by virtue of which the for- 
mer was not only to cease all further opposition to the new enter- 
prise, but aid substantially toward its completion, and in considera- 
tion thereof was to receive $135,000 more than one-half the en- 
tire capital stock of the Chicago & South Side Rapid Transit R. 
R. Co. 

The contract price for the construction of the double track road 
from Van Buren St. to Jackson Park was $15,000,000, payable one- 
half in bonds and half in stock of the Chicago & South Side Rapid 
Transit R. R. Co. The estimated cost of the completely equipped 
and operative road was at the outset $6,750,000. This estimate 
was made by Geo. B. Cornell, Chief Engineer of the first elevated 
road built in Brooklyn, N. Y. ; $750,000 was also set aside to reim- 
burse the promoters, making a total of $7,500,000. Bonds for this 
amount were authorized and the first lot of $813,000 was sold for 
the same amount in cash. 

It will thus be seen that the prospective profits of the deal were 
$7,500,000, or the entire authorized capital stock of the company, 
$3*885,000 of which was to accrue to the Chicago City Railway 
Company. 

The care with which that company protected its interests in the 
premises may be inferred from the detailed arrangements under 
which the construction progressed. Not only was it represented 
on the board of the elevated road company by three out of five 
directors, but its president, C. B. Holmes, constituted one of a com- 
mittee of two in full control of the finances, the other member being 
Col. Walcott, then vice-president of the construction company. 
Furthermore, all the bonds ($7,500,000) when received from the 
printers, were deposited with the Northern Trust Company in es- 
crow to be drawn out only in monthly installments not exceeding 
the actual cost of material and labor put into the foundations, struc- 
ture, etc., as the work progressed, and then only on the joint order 
of the two committeemen, the certificate of the chief engineer as to 
the work actually completed, and a certified copy of each separate 
resolution of the board of directors of the elevated railroad author- 



82 MUNICIPAL AFFAIRS. 

iz'mg the issue of each installment of bonds by way of reimburse- 
ment of its outlay. 

Even the new chief engineer was an independent personage, ap- 
pointed by mutual consent, and the person selected for this post 
was taken direct from the consolidated elevated railroads in New 
York City, where he had been chief engineer for nearly fifteen 
years, in order that he might be absolutely unprejudiced in favor 
of either party's interests as against the interests of the other. 

With each installment of bonds, a certificate for a corresponding 
amount of capital stock was issued to the construction company, 
and then returned by that company and split up into certificates of a 
smaller denomination, half, representing the amount due the Chi- 
cago City Railway Co., being transferred to the Chicago Trading 
Co., of which Samuel W. Allerton, one of the directors of the City 
Railway Co., was president, it having been stipulated that this 
share of the stock was "to be placed in the hands of such person or 
corporation as the Chicago City Railway Company shall designate, ,, 
and by resolution of the board of directors of that company passed 
December 13, 1889, the Chicago Trading Company was designated 
"as the corporation to own and hold the said stock." 

The first issue of bonds under the chief engineer's certificate of 
work done was for $813,000, $500,000 of which were purchased at 
par by the Chicago City Railway Company and the proceeds de- 
posited in the Corn Exchange Bank to the order only of the two 
committeemen. Subsequently another lot of $1,500,000 was sold, 
this time at 10 per cent, discount, one-half of which was taken by 
the Chicago City Railway Co. Another lot, $73,000, at the same 
rate of discount, was also taken by the same company, making a 
total of $1,323,000 in first mortgage bonds for which the Chicago 
City Railway Company paid $1,240,700 in cash. 

It is uncertain to what extent the company aided directly in dis- 
posing of the remaining bonds, but $3,914,000 were sold in two lots 
to parties in Chicago, one a director in the company, at an average 
discount of 11.45 per cent., and the entire issue of $7,500,000 pro- 
duced a net return of only $6,157,110, or less than the original 
estimate of the cost of the completed road. 

Early in 1892 it became evident that the cost of the completed 
road would greatly exceed the first estimate, and thereupon dis- 



CHICAGO STREET RAILWAYS. 83 

sensions arose between the parties in interest, and for many months 
after the money gave out, the work of construction was at a full 
stop, the construction company apparently being unable to furnish 
more funds, and the street railway company apparently being un- 
willing to do so until the construction company retired. 

Furthermore, the extra $135,000, or controlling interest in the 
stock, which it was stipulated should be transferred to the street 
railway company, was being withheld by the construction com- 
pany. Finally, on December 15, 1892, the construction company 
retired and the property was turned over to the elevated railroad 
itself to complete. The stock in dispute was also transferred to the 
Chicago Trading Company, making a total of $3,885,000 standing in 
the name of that company out of a total of $7,500,000. 

One of the legacies left by the construction company was the 
general manager of that portion of the road that had been opened 
for traffic and was being operated by the construction company. 
This individual was also the nominal president of the elevated rail- 
road company. Apparently he did not appreciate the logic of 
events, for he held on long enough to be removed to make room 
for the brother of the president of the Chicago City Railway Co. 

At a meeting of the stockholders held February 16, 1893, a 
new issue of bonds, amounting to $5,000,000, was authorized, pur- 
porting to be a first mortgage on the 63d St. line of the company. 
In the meantime the Chicago City Railway Co. had advanced $912,- 
000 more toward the completion of the elevated road, and between 
February 16, 1893, and March 27, 1893, $350,000 additional, mak- 
ing a total of $1,262,000, without other security than the ordinary 
notes of the elevated railroad company. 

This remarkable display of confidence in the management of 
the elevated railroad company, considering the safeguard under 
which all previous advances had been made, may possibly be ex- 
plained by the supposition that the two companies were at that 
time practically one and the same institution. 

On March 28, 1893, a further advance was made, bringing the 
total up to $1,500,000. Thereupon three new notes of $500,000 
each were issued by the elevated railroad company to the Chicago 
City Railway Co., each secured by 666 of the new $1,000 so-called 
extension bonds, to take up the others. Between March 28, 1893, 



84 MUNICIPAL AFFAIRS. 

and July 26, 1893, the total amount advanced was increased to 
$2,250,000, secured by $3,000,000 of the new bonds. 

The road had now been operated through the built up portion of 
the territory through which it was constructed for more than a 
year, and it had long been evident that it could not pay operation 
expenses and interest on its bonded debt. In fact, up to March 30, 
1893, it was $30,000 behind on its operating expenses alone. 

Under these circumstances there was no option left the Chicago 
City Railway Co. but to accept the $3,000,000 collateral on the 
$2,250,000 loan in full payment thereof, and return the notes to be 
canceled, and this was authorized August 5, 1893, and reported 
done August 29, 1893. 

The first lot of $500,000 first mortgage bonds purchased by the 
Chicago City Railway was disposed of for cash prior to 1893, and 
the balance, $823,000, was likewise disposed of during 1893. On 
the other hand, the so-called extension bonds ($3,000,000) were 
distributed among the stockholders of the Chicago City Ry. Co. as 
an extra dividend the same year (1893). 

The $3,885,000 stock of the elevated railroad company was sur- 
rendered by the Chicago Trading Company and new certificates 
were issued by the elevated railroad company in the names of the 
individual stockholders of the Chicago City Railway Co. in pro- 
portion to their holdings in the latter company. 



EXHIBIT II.— NORTH CHICAGO CITY RAILWAY CO. 

Sec. J. — Lease of Road to New Company. 

This company was incorporated February 14, 1859. The great 
fire of 1 87 1 practically destroyed all of its property. In 1872 
it began to reconstruct its track, and, by May 24, 1886, 
had in operation 44.774 miles of track (one mile of double-track 
road being counted as two miles of track). 

On May 24, 1886, it entered into an operating agreement with 
the North Chicago Street Railroad Company, by the terms of which 
it surrendered control of its property for the period of 999 years. 
The motive for this act is set forth in the preamble to the agree- 
ment, a part of which is as follows : 



CHICAGO STREET RAILWAYS. 85 

Whereas, there is a growing demand upon said railway company by the public 
for improved motive power, extensions of new lines, and other improvements m 
connection with its plant and lines of street railway now owned, or leased 
by it; and 

Whereas, the said railway company is without the facilities for constructing 
and operating to the best advantage such improved motive power, and purposes to 
make a contract with some party who has faith that the contemplated improvements 
will be profitable and who has the facilities for making them; and 

Whereas, the said railway company has been in negotiation with said railroad 
company with the view of coming to some understanding that would be mutually 
satisfactory, upon which the said railroad company would contract to construct 
and put in operation the improved motive power and otherwise extend and im- 
prove the plant and lines of said street railway company, and have agreed upon 
the terms and conditions hereafter set forth; and 

Whereas, the said railway company has accepted said terms and has requested 
that the said railroad company furnish for it the appliances necessary for such new 
motive power, and to operate the same, and also from time to time, when feasible 
and desirable, to make such extensions and other improvements as the public may 
require, and be approved by the Board of Directors of said companies, it being 
understood that a part of the lines of said railway company shall be cabled within 
the time hereafter named, and the balance from time to time, as may be directed 
in the manner aforesaid, and to insure the proper operation of the cable portion, 
the whole line must be put in exclusive charge of the railroad company, * * * 

The "railway company" referred to was the North Chicago 
City Railway Company and the "railroad company" the North 
Chicago Street Railroad Company. 

The terms referred to as having been agreed upon were, in 
brief, as follows : 

"In consideration of mutual promises, and of the sum of one 
dollar by each to the other respectively paid, * * * [the par- 
ties concerned] * * * do covenant, promise and agree to 
stand with each other, as follows :■" 

i. Agreement to continue for 999 years " * * * and 
during said term shall bind the parties without any right in either 
company to revoke the same without the written consent of the 
other." 

2. The North Chicago Street Railroad Company to construct, 
with reasonable speed, a cable road on North Clark Street, 
" * * * commencing at some convenient point near the north 
end of the Bridge crossing the Chicago River, to a point near 
Diversey Street in the town of Lake View," the same to be com- 
pleted within two years after permission from the city and town 
authorities is granted " * * * and for the purpose of perpet- 



86 MUNICIPAL AFFAIRS. 

uating reliable evidence to be used in an equitable adjustment be- 
tween the parties hereto in case this contract shall be terminated 
in any manner as hereinafter set forth, it must keep an accurate 
account of its expenditures in and about said improvements, charg- 
ing therefor the actual cost thereof, * * * ." 

"The railway company will execute and deliver a mortgage of 
its franchises and property to secure the payment of all amounts and 
interest thereon at the rate of six per cent per annum, payable semi- 
annually, which shall be expended by the said railroad company in 
such construction, or the making of the improvements and exten- 
sions herein provided for. The amount so expended, with the in- 
terest thereon, as before provided, shall, in the event of the termina- 
tion of this agreement by the parties hereto, or otherwise, or by 
reason of the intervention of any court of competent jurisdiction, 
at once become due and payable, and, if the amount found to be 
due shall not be paid, the said mortgage may be immediately 
foreclosed." 

3. The North Chicago Street Railroad Company is required 
to construct and operate such cable road as is necessary " * * * 
other than above provided for * * [but] * * such addi- 
tional construction shall only be with the assent of both of the 
parties * * [or] * * as shall be mutually agreed upon from 

time to time." 

"Such additional improvements shall be constructed by said 
railroad company, and be paid for, and be secured for the repayment 
thereof by railway company in the manner heretofore provided for 
as to that portion of said railway on North Clark Street, between 
the bridge and Diversey Street, or at the option of said railroad 
company, it shall have the right to require said railway 
company to issue its bonds for the amount of any such expenditures 
in the form, when due, and bearing such rate of interest as said rail- 
road company may require, and to be secured by mortgage on all, 
or a part, of the property of said railway company." 

4. It is expressly stipulated that the North Chicago Street 
Railroad Company " * * * will hereafter supply, at its own 
cost and charge, such cars, harness and horses as shall be necessary 
in addition to those now owned by the railway company, * * 
[and] * * ' the same thus supplied shall be the property of the 
railroad company." 



CHICAGO STREET RAILWAYS. 87 

5. "Betterments shall be made and constructed by the rail- 
road company as the same shall be agreed upon hereafter by the 
parties hereto. The cost of the same shall be paid to the railroad 
company in the manner heretofore provided in the case of construc- 
tion of cables and motors. Within the term 'betterments' shall be 
comprised all construction, other than the Clark Street line and 
other improvements which the railroad company has agreed to do 
in connection therewith and replacements, such as extension of rail- 
ways, new buildings and alterations and improvements of existing 
railways and buildings." 

6. An appraisement of all the personal property of the North 
Chicago City Railway Company is provided for, the North Chicago 
Street Railroad Company to be permitted " * * * to use the 
same or their proceeds without charge * * [but] * * in 
case of the termination of this contract for any cause, the railroad 
company shall pay to the railway company the amount of said ap- 
praisement with interest only from the time of such termination." 

As an offset, any property of the same character owned by the 
North Chicago Street Railroad Company that may be in use on the 
North Chicago City Railway Company's road at the time of the 
termination of the agreement must likewise be appraised and its 
value may be set off against the claim of the North Chicago City 
Railway Company. 

7. Quarter-annually, commencing July ist, 1886, the North 
Chicago Street Railroad stipulates to pay the other company 
$37,500, also the interest on all bonds and mortgages of the "rail- 
way company" then outstanding "and which may hereafter be 
created in the renewal and extension thereof, and all which may 
hereafter be created for the betterments and new constructions 
heretofore provided for * * * " 

It is further stipulated that " * * * as soon as the cable 
to be constructed on North Clark Street, as herein provided, is com- 
pleted, the railroad company shall pay to the railway company out 
of its own funds $500,000 in cash, or, at its own option, in lieu 
thereof the same amount in the shares of its capital stock, assess- 
ments paid **'*/' 

Sec. 2. — Financial Condition in (886. 

The inventory of property transferred to the North Chicago 



88 



MUNICIPAL AFFAIRS. 



Street Railroad Company under the above agreement was as fol- 
lows: 

1,691 Horses, at $100 $169,100.00 

175 Box cars, at 700 122,500.00 

175 Open cars, at 500 87,500.00 

10 Snow-plows, at 500 5,000.00 

6 Sweepers, at 1,000 6,000.00 

6 Salters, at 200 1,200.00 

7 Hay-cutters, at 50 350.00 

575 Sets harness, at 15 8,625.00 

9 Wagons, at 50 450.00 

4 Buggies, at 50 200.00 

1,400 tons of hay, at 10 14,000.00 

Horseshoes and nails 1,500.00 

Track material 6,750.09 

Track tools, shovels, picks, etc 250.0* 

Material in hands of purchasing agent 420.79 

Office furniture 500.00 

Stable furniture, etc. — 

City Limits 200 

Lincoln Ave 200 

Racine Ave ■ 150 

Clybourn Ave 150 

Kroger St 150 

Larrabee St 150 

Sedgwick St 150 

Clark St 50 



Cash 

Inter-Ocean bonds, 6 at $500 

Due from Merchants Loan & Trust Co. 
Due from City of Chicago 



1,200.00 
60,371.59 

3,000.00 
147.28 
425.00 



Total $489,489.66 

A trial balance of the general ledger of the North Chicago City 
Railway Company on May 24, 1886, exhibits its financial condition 
as follows : 

TRIAL BALANCE, MAY 24, 1 886, NORTH CHICAGO CITY RY. CO. 



Construction $908,324.78 

Real estate 418,024.84 

Buildings 245,188.37 

Cars 210,000.00 

Horses 169,100.00 

Miscellaneous equipments . . . 12,200.00 

Harness 8,625.00 

Wagons and buggies 650.00 

Hay 14,000.00 

Horseshoes and nails 1,500.00 

Stable account 1,550.00 

Tools 250.00 

Office furniture 500.00 

Supplies 420.79 

Inter-Ocean bonds 3,000.00 

Merchants' Loan & Trust Co 147.28 

City of Chicago 425-00 

Cash 60,371.59 



Capital stock $500,000.00 

Bonds 1,247,000.00 

Bills payable 54,000.00 

Accounts payable 25,001.96 

Income account 228,275.69 



$2,054,277.05 



$2,054,277.65 



CHICAGO STREET RAILWAYS. 89 

A trial balance of the books of the North Chicago Street Rail- 
road Company immediately after that company assumed control 
makes the following exhibit : 

TRIAL BALANCE, MAY 24, l886, NORTH CHICAGO ST. RAILROAD CO. 

Liabilities of N. C. C. Ry. Co. assumed $79,001.96 

Cash 60,371.59 

Merchants' Loan & Trust Co 147.28 

City of Chicago 425.00 

Inter-Ocean bonds 3,000.00 

$142,945.83 

Bills payable N. C. C. Ry. Co $54,000.00 

Accounts payable N. C. C. Ry. Co 25,001.96 

Income account 63,943.87 

■ ■ 
$142,945.83 

A comparison of the foregoing schedules shows that with the 
exception of the $60,371.59 cash, $147.28 due from the Merchants' 
Loan & Trust Company, $425 due from the City of Chicago and the 
$3,000 Inter-Ocean bonds, none of the property referred to in the 
inventory was transferred to or entered in the books of the new 
company. Neither was any entry made to represent the 44.774 
miles of the road, nor the real estate, buildings, and equipment 
transferred under the lease. It is true, these properties did not 
form part of the permanent assets of the North Chicago Street Rail- 
road Company, although the long lease of 999 years contemplated 
practically a complete transfer ; neither did the items enumerated in 
the inventory, nevertheless, some of the items in the inventory are 
taken up, and, as will be seen above, the incompleteness of the en- 
tries necessitated a credit to Income Account of $63,943.87 to bal- 
ance the accounts, although the company had as yet derived no in- 
come from the use of the property. 

An intelligent record of the transactions affected by or growing 
out of the lease required a debit entry on the books of the lessee 
company of a sum or sums representing either the book or ap- 
praised value of all the property of every description transferred, 
whether permanently or temporarily, and a corresponding entry 
representing the aggregate value of the property to the credit of the 
North Chicago City Railway Company to balance the account. 
Sec. 3. — N. C S. R, R, Co. Buys Controlling Interest. 

On June 29, 1886, or one month following the lease, the direc- 
tors of the North Chicago Street Railroad Company determined to 



90 MUNICIPAL AFFAIRS. 

purchase 2,501 of the 5,000 shares of the North Chicago City Rail- 
way Company's capital stock and authorized the expenditure of $1,- 
500,600 for that purpose, or at the rate of $600 per share ($100 be- 
ing par). 

The actual purchase was not made until September 16, 1886, 
when the books of the North Chicago Street Railroad Company 
show the following entries : 
Purchase of North Chicago City Railway Company stock, Dr. — 

To Wm. L. Elkins and Peter A. B. Widener, for 2,501 shares of 
North Chicago City Railway Company stock as per resolution of 
Board of Directors passed June 29, 1886 $1,500,600 

Immediately following this entry, and of the same date, is an- 
other showing that the credit to William L. Elkins and P. A. B. 
Widener was partially offset by the delivery to them of the first issue 
of bonds made by the North Chicago Street Railroad Company, 

viz. : 

Wm. L. Elkins and Peter A. B. Widener, Dr.— 

To bond account for 3,000 5 per cent 20-year $500 mortgage bonds, 
dated July 1, 1886, issued in pursuance to resolution of Board of 
Directors, passed June 29, 1886 $1,500,000 

According to the 1896 issue of the Economist Street Railway 
Supplement, these shares were only a short time previously pur- 
chased from Jacob Rehm, V. C. Turner and others by the United 
States Construction Company, from which Company they were evi- 
dently transferred to William L. Elkins and Peter A. B. Widener 
before delivery to the North Chicago Street Railroad Company as 
above noted. 

On this subject the Economist says : 

In March, 1886, Charles T. Yerkes and his Philadelphia associates purchased 
from Jacob Rehm 729 shares of the capital stock, from V. C. Turner and others 
represented by Mr. Turner, 1,772 shares, making a total of 2,501 shares of the 5,000 
shares outstanding. The price was $600 a share. The total payment of $1,500,600 
was made in cash at the Merchants' Loan & Trust Company March 23, 1886. The 
purchase was made in the name of the United States Construction Company. 

There is nothing in the books of either the lessee or lessor com- 
pany to confirm this statement If true, it would seem to indicate 
that whatever profit there was in the deal accrued solely to the ben- 
efit of Jacob Rehm and V. C Turner and those whom they repre- 
sented, as the stock was turned over to the North Chicago Street 
Railroad Company by Elkins and Widener at the same price per 
share that Rehm and Turner received for it. 



CHICAGO STREET RAILWAYS. 91 

Sec 4* — Contracts for Conversion to Cable Traetion. 

On May 24, 1886, the North Chicago Street Railroad Company 
entered into a contract with the United States Construction Com- 
pany " * * * to construct and put in operation a cable line on 

Clark Street from at or near Kinzie street to the Limits 

barn in Lake View." The United States Construction Company 
was also to secure for the railroad company the right to lay tracks 
on La Salle Street and Avenue between Illinois and Jackson streets, 
and on Illinois between Clark and Wells streets, and through the 
La Salle Street tunnel. No particular reference was made to a 
cable line on Wells Street, nor to the loop line on Monroe, Dear- 
born and Randolph streets, nor to the purchase of any land upon 
which to erect power houses. All of these matters seem to have 
been left to the judgment of the Construction company. Even the 
consideration to be paid the Construction company is uncertain, ex- 
cept that " * * * not less than $4,500,000, payable in the 
stock of the said company * * [is named] * * provided 
the length of said North Chicago Street Railroad Company does 
not exceed 15 miles." 

Under this contract 5.958 miles single track horse road on 
North Clark Street, from Wells Street to Diversey Street,were con- 
verted into cable road and likewise 3.543 miles single track on Wells 
Street from Illinois to the junction of Wells Street and North Clark 
Street. 

The only cable line specifically referred to in the lease of May 
24, 1886, was that to be constructed on North Clark Street, and 
whatever expense the North Chicago Street Railroad Company 
might incur in its construction was to be a charge against the North 
Chicago City Railway Company, to be liquidated only in the con- 
tingency of a termination of the lease at the end of or before the 
expiration of 999 years. In the event of any other cable road being 
constructed (the lease providing that this only could be done by 
mutual agreement), it was optional with the North Chicago Street 
Railroad Company to carry the expense as a charge against the les- 
sor company, the same as in the case of the North Clark Street line, 
or it could require the lessor company to increase its outstanding 
bonded indebtedness to the extent of the sum expended for con- 
struction and deliver the new bonds to the lessee company by way 



92 MUNICIPAL AFFAIRS. 

of reimbursement for its expenditures. In either case, however, the 
lease stipulated that " * * * for the purpose of perpetuating 
reliable evidence to be used in an equitable adjustment between the 
parties hereto * * "an accurate account of the expenditures 
must be kept and into that account only must be charged " * * 
the actual cost of the imrovements * * * ." 

No such records are to be found in the books of the lessee com- 
pany, and it does not appear upon what showing the directors of 
the lessor company consented to the issue of new bonds for such 
improvements as was the case several times subsequent to the trans- 
fer of the property to the lessee company. For example, on Sep- 
tember 20, 1887, the lessee company entered into a contract with 
the United States Construction Company to cable Lincoln Avenue 
from Wrightwood Avenue to Center Street and Center Street from 
Lincoln Avenue to North Clark Street, forming a junction at that 
point with the cable road on North Clark Street, a total of 2.724 
miles single track cable road. The contract also provided for the 
erection of a new power house at Wrightwood and Lincoln avenues, 
on land already owned by the North Chicago City Railway Com- 
pany, on which was standing the car barn of that company. The 
consideration to be paid was $500,000 in 4^ per cent 40-year bonds 
of the North Chicago City Railway Company. 

Three hundred of these bonds, representing $300,000, were is- 
sued by the last-named company on May 1, 1888, and delivered to 
the United States Construction Company, and on February 21, 
1889, 198 more bonds, representing $198,000, were delivered, and 
$2,000 in cash to complete the contract. 

On January 25, 1890, a similar contract was made with the 
United States Construction Company to cable Clybourne Avenue 
from the terminus near Fullerton Avenue to Division Street and 
Division Street to the junction with the cable road on Wells Street 
at Division and Wells streets, a distance of 4.459 miles single track 
cable road. Nothing further was called for by this contract, the 
consideration being $500,000 in 4^ per cent bonds of the North 
Chicago City Railway Company. 

By the terms of this contract the approximate cost of con- 
structing a mile of cable road is obtained. Assuming that it re- 
quired the full $500,000 to complete the 4.459 miles of single track 



CHICAGO STREET RAILWAYS. 93 

referred to and omitting from consideration the 4,000 lineal feet of 
underground conduit on Division and Clark streets, connecting this 
section of road with the power house on Clark Street, the cost per 
mile would be $112,132.77. As this assumption allows no profit for 
the Construction company, it cannot very well be under the actual 
cost, and, if taken as a basis for estimating the cost of the entire 
road, does no injustice to the management for that reason, since the 
absence of any other reliable data on the subject renders its adop- 
tion necessary. 

At the same time, there is every reason to suppose that the cost 
originally estimated was $425,000, with $75,000 added for profit and 
risk, being a margin of nearly 20 per cent over the estimated cost, 
a percentage not infrequently adopted in estimating for contract 
work. This gives an estimated cost of $95,000 per mile of single 
track, which is a little less than the actual cost per mile of the Blue 
Island Avenue, Halsted Street and Van Buren Street cable lines 
of the West Chicago Street Railroad Company. 

An earnest endeavor has been made to induce the management 
of the North Chicago Street Railroad Company to produce the 
books of the United States Construction Company for examination, 
but without success, as fully explained elsewhere in this report. 
The necessity for some definite information concerning the actual 
cost of the work done by the United States Construction Company 
is so obvious that, in the absence of the books referred to, an esti- 
mate of the cost of the whole road based upon certain parts, the cost 
of which is known, would seem to be warranted and fair. 

Certainly no injustice will be done the management of the 
North Chicago Street Railroad Company if, in adopting the sum of 
$112,132.77 as the average cost per mile of the entire North Side 
cable road, it should subsequently appear that the amount actually 
paid the Construction company was greatly in excess of that price. 
On the contrary, when it is considered that the sum mentioned is 
$6,000 per mile greater than the cost of a precisely similar road on 
Blue Island Avenue, Halsted Street and Van Buren Street, includ- 
ing the Adams Street loop, both being built from practically the 
same specifications, and that it is $30,000 per mile 'greater than the 
first experimental section of cable road ever built in Chicago, being 
the lines on State Street and Wabash and Cottage Grove avenues, 



94 MUNICIPAL AFFAIRS. 

north from Thirty-ninth street, including the downtown loop, con- 
structed nearly ten years earlier than the cable road on the North 
Side; and $50,000 per mile greater than the subsequent extensions 
of the South Side cable lines, completed about the same time as the 
North Clark and Wells Street lines, and even $50,000 per mile 
greater than the track construction of the Van Buren Street tunnel, 
it is difficult to see how any suspicion of unfairness to the railroad 
management can attach to the sum selected for the purpose speci- 
fied, particularly as the management has created the necessity for 
its selection by not producing the records which the lease of May 
24, 1886, explicitly stipulated should be preserved. 

In addition to the 16.684 miles single track cable road already 
referred to as having been constructed by the North Chicago Street 
Railroad Company, for the account of the North Chicago City Rail- 
way Company, there was also constructed the La Salle, Monroe, 
Dearborn and Randolph streets loop of 1.626 miles single track, 
making a total of 18.310 miles single track cable road built by the 
United States Construction Company at an estimated aggregate 
cost of $2,053,151.00, or at the rate of $112,132.77 per mile. 

On January 12, 1887, a contract was entered into with the 
United States Construction Company to build 11.385 miles single 
track new horse road, cost of which I have estimated at $255,914.99, 
or $22,478.26 per mile, being the same rate per mile as the actual 
cost for similar road built by the North Chicago Street Railroad 
Company about the same time, viz.: 11.682 miles single track at 
$22,478.26 per mile, or an aggregate of $262,591.03. 

In addition thereto the lessee company built 3.626 miles single 
track new electric road at $20,530.15 per mile, and converted 22.280 
miles single track horse road into electric road at $14,428.15 per 
mile, and 28.173 miles at $20,530.15 per mile, making a grand total 
of $3,740,926.65 expended for track, including $115,885.61 for mis- 
cellaneous paving and $79,001.96 old floating debt assumed for ac- 
count of the North Chicago City Railway Company 

Under the contract of May 24, 1886, the United States Con- 
struction Company erected two cable power houses — one on Clark 
Street, between £lm and Maple streets, and one on Illinois Street, 
corner La Salle Avenue. The one erected at Clark Street and 
Elm Street is on property belonging to the North Chicago City 



CHICAGO STREET RAILWAYS. 95 

Railway Company. Four engines of 500 horse-power each were 
originally installed at this power house. 

Now the most expensive cable power house in the city is that 
which operates the Blue Island Avenue and Halsted Street cable 
system on the West Side, the machinery in which cost $173,240.47. 
The engines are 3,600 horse-power. The machinery in the Van 
Buren Street power house cost $116,627.53, and the engines are 
2,600 horse power. At the same rate of decrease in cost per horse 
power, the cost of the machinery at the Clark Street power house 
would be $84,659.79, or $42 per horse-power. 

The cost of the Van Buren Street power house was $142,- 
326.44 and that of the Blue Island Avenue power house $233,290.50, 
both including the land as well as the buildings, whereas the land 
on which the Clark Street power house is erected was already 
owned by the North Chicago City Railway Company. A fair es- 
timate of the cost of the building, therefore, would not exceed 
$50,000, or $135,000 for the building and machinery, and $200,000 
for the land, building and machinery at Illinois Street and La Salle 
Avenue. 

The contract of September 20, 1887, for the Lincoln Avenue 
cable also provided for the erection of a power house at Lincoln 
and Wrightwood avenues. The contract price for the cable road 
and power house was $500,000. At $112,132.77 per mile for the 
2.724 miles of single track cable road would leave $194,550.33 to 
cover the cost of the power house and machinery, and allow for 
the profit of the United States Construction Company. As the 
land on which the power house is erected was already owned by the 
North Chicago City Railway Company, if 10 per cent, or $50,000, 
is deducted for profit, the balance, $144,550.33, would seem to 
be a fair estimate of the cost of the power house and machinery. 

The contract of January 12, 1887, in addition to providing for 
the construction of 1 1.385 miles of single track horse road, required 
the construction of a brick barn adjoining the Clark Street power 
house, the cost of which was approximately $75,000, the land be- 
ing owned already by the North Chicago City Railway Company. 
It also required the removal of the Wells Street bridge to Dear- 
born Street and the erection of a new four-track iron bridge at 
Wells Street. The contract of May 24, 1886, also required the 
erection of a new four-track iron bridge at Clark Street. 



96 MUNICIPAL AFFAIRS. 

The cost of these bridges was as follows : Clark Street, $132,- 
375; Wells Street, $145,750; total, $278,125. 

Sec. 5. — Cost of Reconstruction* 

This completes all the expenditures made for account of the 

North Chicago City Railway Company down to December 31, 1897, 

and includes the cost of all construction done by the United States 

Construction Company on the North Side, viz : 

18.31 miles cable road, at $112,132.77 $2,053,151.00 

11.385 miles horse road, at $22,478.26 255,914.99 

Clark street power house and machinery 135,000.00 

Illinois street power house and machinery 200,000.00 

Lincoln avenue power house and machinery 144,550.33 

Clark street barn 75,000.00 

Clark and Wells street bridges 278,125.00 

Total $3,141,741.32 

For these improvements the United States Construction Com- 
pany has received $4,500,000 in the capital stock of the North Chi- 
cago Street Railroad Company, $998,000 in 4J per cent bonds of 
the North Chicago City Railway Company, and $710,908.39 in 
cash from the North Chicago Street Railroad Company — a total of 
$6,208,908.39, or $3,067,167.07 in excess of the approximate cost of 
the betterments furnished. 

The improvements paid for by the North Chicago Street Rail- 
road Company direct, without the intermediation of a construction 
company, were as follows: 

11.682 miles new horse road, at $22,478.26 $262,591.03 

3.626 miles new electric road, at $20,530.15 74,442.32 

28.173 miles electric road converted from horse road, at $20,530.15 578,395-92 

22.280 miles horse road, at $14,428.15 321,543.82 

Real estate improvements 214,865.79 

Miscellaneous paving 115,885.61 

Miscellaneous — 

Electric light LaSalle street tunnel $3,200.00 

Dearborn street bridge 2,934.00 

Wells street bridge 779-4° 

Clark street cable station 9,314.29 

LaSalle avenue cable station 21,990.46 

Cable shears 340.00 

Elm street station 2,143.00 

Lincoln avenue station i,353- 12 

Pumping station LaSalle street tunnel 764- I 7 

Nast Splicing system 3,000.00 

Loop alterations 8,854.84 

54,67328 



CHICAGO STREET RAILWAYS. 97 

Lincoln avenue renewal $8,496.77 

Limits loop 3,52700 

12,023.77 

$1,634,421.54 
making a grand total of $4,776,162.86. 

To this should be added the $79,001.96 old floating debt of the 
lessor company assumed and paid by the lessee company, and the 
$3,067,167.07 profit of the United States Construction Company 
on the several contracts for construction, making the total expendi- 
tures of the lessee company for account of the lessor company $7,- 
922,331.89. In part payment the lessor company has issued $1,- 
750,000 in bonds, leaving a balance of $6,172,331.89 still due lessee 
company on December 31, 1897. 

Sec. 6. — Original Cost of Horse Road* 

The mileage of this road on May 24, 1886, was 44.774 miles 
single track horse railroad, and cost, according to the books of 
the company, $908,324.78, or an average of $20,286.88 per mile. 

Of the original road there still remains unchanged 0.153 miles 
horse railroad, representing an original cost value of $3,103.89. 

The remaining 44.621 miles single track have been converted 
into cable and electric road, as follows: 16,448 miles into cable at 
$112,132.77, $1,844,359.80; 28.173 miles into electric at $20,530.15, 
$578,395.92. Since the lease of May 24, 1886, the following road 
has been built: 1.862 miles new cable at $112,132.77, $208,791.20; 
23.067 miles horse at $22,478.26, $518,506.02. Of the 23.067 miles 
single track new horse road 22.28 miles were subsequently con- 
verted into electric road at $14,428.15 per mile, or $321,543.82 in 
the aggregate. The remaining 0.787 miles is still unchanged as 
horse railroad. 

In addition to the foregoing road 3.626 miles single track new 
electric road were built at $20,530.15 per mile, or $74,442.32 in the 
aggregate, making a grand total of $4,454,363.86, recapitulated as 
follows : 

44.774 miles original horse road, at $20,286.88 $908,324.78 

16.448 miles original horse road converted into cable, at $112,132.77. ... 1,844,359.80 

23.067 miles new horse road, at $22,478.26 518,506.02 

28.173 miles original horse road converted into electric, at $20,530.15... 578,395.92 

22.280 miles new horse road converted into electric, at $14,428.15 321,543.82 

1.862 miles new cable, at $112,132.77 208,791.20 

3.626 miles new electric, at $20,530.15 74,442.32 

$4,454,363.86 



98 MUNICIPAL AFFAIRS. 

Sec. 7. — Original Cost of Present Assets* 

Of the above road there was still existing on December 31, 

1897, the following: 

18.310 miles cable, at $112,13277 $2,053,151.00 

22.280 miles electric, at $14,428.15 321,543.82 

31.799 miles electric, at $20,530.15 652,838.24 

22.280 miles paving relaid when road was converted from horse to 

electric 115,885.61 

0.153 miles horse road, at $20,286.88 3,103.89 

O.787 miles horse road, at $22,478.26 17,690.39 

73-329 miles $3,164,212.95 

showing a total depreciation amounting to $1,290,150.91. 

In the case of the 54.079 miles single track electric road in 
the above schedule, a large amount of the pavement already down 
was relaid when the road was converted from horse to electric road. 
The original cost value of such pavement was $135,952.80, and by 
being relaid became incorporated into the cost value of the new 
electric road. 

The following schedule shows the distribution of the cost value 

of the 54.079 miles single track electric road of the North Chicago 

City Railway Company on December 31, 1897: 

Overhead and underground electric construction. $405,555.19; per mile, $7,499.31 

Paving 329,990.30 ; per mile, 6,102.00 

Steel rails, 85 lbs 226,906.89 ; per mile, 4,194.29 

Miscellaneous material and labor 147,882.48 ; per mile, 2,734.55 

$1,110,334.86 $20,530.15 

The distribution of the cost of paving was as follows : 

Granite 30,521 square yards, at $2.00, $61,041.44 

Cobble 161,933 square yards, at 1.25, 202,415.99 

Brick 8,626 square yards, at 1.60, 13,802.14 

Wood 52,731 square yards, at 1.00, 52,730-73 

Total 253,811 square yards, $329,990-30 

These schedules include the $135,952.80 of pavement relaid. 

According to the lease of May 24, 1886, the personal property 
of the North Chicago City Railway Company turned over to its 
successor stands as a charge against the latter at the appraised value 
agreed upon, to-wit: $489,489.66. 

The real estate and buildings existing at the time of the lease, 
representing an original cost value of $245,188.37 and $418,024.84 
respectively, have also to be accounted for. 

On the other hand, the lessee company has expended for mis- 
cellaneous improvements for account of the lessor company, from 



CHICAGO STREET RAILWAYS. 99 

May 24, 1886, to December 31, 1897, the sum of $281,562.84 and 

$278,125.00 for the Clark and Wells Street bridges, for which it is 

entitled to credit under the terms of the lease. 

It has also made the following special expenditures for account 

of the lessor company, viz : 

Lincoln avenue power house and machinery $144,550-33 

Clark street power house and machinery 135,000.00 

Illinois street power house and machinery 200,000.00 

Clark street barn 75,000.00 

Total $554,550.33 

To recapitulate, there existed on December 31, 1897, the fol- 
lowing assets : 

73.329 miles single track road $3,184,280.14 

Real estate 245,188.37 

Buildings 1,187,440.96 

Personal property per inventory 489,489.66 

Total $5>io6,399.i3 1 

Sec. 8» — Resume of Assets and Liabilities. 

The outstanding liabilities on December 31, 1897, were as fol- 
lows: 

Capital stock $500,000.00 

First mortgage 6 per cent, bonds 500,000.00 

Consolidated 4^2 per cent, mortgage bonds 2,497,000.00 

Due North Chicago Street Railroad Company for expenditures for bet- 
terments 6,172,331.89 

$9,669,331.89 
showing an excess of $4,562,932.76 over the cost value of the ex- 
isting property. 

As this cost value is only $2,109,399.13 in excess of the out- 
standing bonds which are the first lien against the property, it will 
be seen that there is a loss of $4,062,932.76 on the claim of the 
North Chicago Street Railroad Company, and nothing in the way 
of tangible property to secure the stockholders. 

1 In strict accordance with the contract, the item, "Personal property per in- 
ventory, $489,489.66," is an asset, but when ascertaining the net assets of both com- 
panies this item should be excluded, as the property is now ill the possession of the 
North Chicago Street Railroad Co. and is included in its assets. Thus the original 
cost of the property now actually possessed by the N. C. C. Ry. Co. is $4,616,909.47. 

LOFC. 



100 MUNICIPAL AFFAIRS. 

EXHIBIT III.— NORTH CHICAGO STREET RAILROAD 

CO. 

Sec- J. — Early Operations* 

This company was incorporated May 18, 1886. Six days later, 
or on May 24, 1886, it entered into an operating agreement or lease 
with the North Chicago City Railway Company, the full particulars 
of which are given under the head of North Chicago City Railway 
Company. (See Exhibit II., Sections 1 and 2.) The consideration 
to be paid by the lessee company was $37,500 on the first day of 
July, 1886, and the same amount quarterly during the continuance 
of the agreement, being in the nature of a guaranteed dividend of 
30 per cent, per annum on the capital stock of the lessor company 
In addition, the lessee company agreed to guarantee the interest of 
all bonds and mortgages of the lessor company then existing or 
which might thereafter be created, and to pay a bonus of $500,000 
in cash or capital stock of the lessee company. 

One June 29, 1886, the board of directors of the North Chicago 
Street Railroad Company authorized the purchase of 2,501 shares 
of the capital stock of the lessor company at $600 per share, or 
$1,500,600 in the aggregate, and, in order to provide the funds with 
which to make the purchase, decided to issue first mortgage 5 per 
cent, bonds dated July 1, 1886, in the sum of $1,500,000, to be 
partly secured by the deposit in trust of 2,501 shares of stock re- 
iferred to. On September 16, 1886, the bonds, which run to Will- 
iam L. Elkins, were issued to William L. Elkins and Peter A. B. 
Widener, from whom the 2,501 shares are presumed to have been 
received in exchange the same day. 

Thirteen months later, or on November 18, 1887, the board 
of directors of the North Chicago Street Railroad Company passed 
a resolution reciting that "Whereas, the stockholders of the said 
North Chicago City Railway Company desire said payment," re- 
ferring to the $500,000 bonus to be paid under the lease or operat- 
ing agreement of May 24, 1886, " * * * to be made in the 
stock of this company and not in cash ; resolved, that the Treasurer 
purchase 5,000 shares and deliver the same." 

According to an official "History of the Yerkes System of 
Street Railways in the City of Chicago," page 33, I find the fol- 
lowing reference to this payment : "As a further consideration for 



CHICAGO STREET RAILWAYS. 101 

the lease, the stockholders of the North Chicago City Railway 
Company received stock in the new company to an amount equal 
to the par value of their holdings in the old company." As 2,501 
shares of the old company, entitling the owner to a like number of 
shares in the new company in accordance with the above division, 
were at that time deposited with the Fidelity Insurance, Trust & 
Safe Deposit Company of Philadelphia, in trust for the benefit of 
the North Chicago Street Railroad Company, it would seem that 
part of the stock proposed to be divided would revert to the last- 
named company. This was not the case, however, notwithsanding 
the following entry in the books of the company under date of June 
15, 1888, which shows that the full $500,000 was distributed, viz: 
Operating agreement with North Chicago City Railway Company, Dr. — 

To cash United States Construction Company for 5,000 shares of 
the capital stock of North Chicago Street Railroad Company, 
at par, purchased as per resolution of Board of Directors, 
passed November 18, 1887, for the purpose of issue to stock- 
holders holding dividend certificates issued by the North Chi- 
cago City Railway Company to its stockholders in lieu of the 
$500,000 to be paid them by this company, as per operating 
agreement, dated May 24, 1886 $500,000.00 

I can find no record in the book of account of the North 

Chicago City Railway Company of the issue of $500,000 in dividend 

certificates by that company, although such may have been done 

after the books were turned over to the lessee company on May 24, 

1886, and no record made. 

Sec. 2. — Bonds Issued as Dividends. 

In examining the accounts prior to May 24, 1886, I find that 
several large dividends were paid in bonds. For example, in De- 
cember, 1884, a dividend of $250,000 was declared, payable in 
bonds, being 50 per cent, on the capital stock of the company. In 
December, 1882, another dividend of $250,000 was declared, paya- 
ble in bonds, and during the same month what purports to be a 
sale of $250,000 more bonds was in reality another dividend of 
$250,000, making $750,000 in dividends paid in bonds. During 
1882 dividends amounting to 107 per cent, were paid. 

Of the $1,247,000 bonds of the North Chicago City Railway 
Company outstanding at the time of the lease of the road to the 
North Chicago Street Railroad Company, all but $497,000 were 



102 MUNICIPAL AFFAIRS. 

issued as dividends to stockholders, and I am of the impression 
that still another dividend in bonds was paid prior to January I, 
1 88 1, but, as the first ledger of the company cannot be found, al- 
though other books of the original set are still in the possession of 
the lessee company, I am unable to confirm the impression, if at 
all, except by laborious work in reconstructing a new ledger from 
such data as I may be able to find in other books and records. 

The resolution of the board of directors of the North Chicago 
City Railway Company of November 2, 1882, in reference to the 
bond dividend of 1882, authorized "50 per cent, on capital stock, 
payable in 6 per cent. $1,000 bonds and convertible certificates bear- 
ing date of November 1st, 1882." The bonds being for an even 
thousand dollars each, it became necessary to issue both bonds and 
convertible certificates to each shareholder. For example, L. S. 
Buckingham is charged with having received $10,000 in bonds and 
a convertible certificate for $800 on December 4, 1882, being 50 per 
cent, of the stock standing in his name, to-wit : $21,600. The bonds 
issued were numbered 1 to 10 inclusive. Bond 21 went to E. Buck- 
ingham, as also bonds 23 to 25, inclusive. On December 5, 1882, 
bonds 26 to 28, inclusive, are recorded as having been given to 
Martha J. Marble; bonds 32 to 34, inclusive, and 38 to Annie G. 
Moore, and 39, 40 and 43 to Julia F. Porter. In the same manner 
250 bonds were issued during the month of December, 1882, the 
highest number being 471, issued to Mary H. Jones on December 
30, 1882. All of these bonds were charged to dividend account. 

On precisely the same dates during the month, and to the same 
persons, the records show there was sold for cash an exactly even 
sum in bonds and convertible certificates, and the remarkable part 
of it is that every stockholder seemed to be of an even disposition 
financially, immediately purchasing an additional bond and certifi- 
cate for each bond and certificate given to him or her as a dividend. 

There was apparently no condition requiring a stockholder to 
purchase a $1,000 bond before he could be paid his dividend of that 
amount; nevertheless in the issue of the 500 bonds there was un- 
doubtedly an understanding between the company and the share- 
holders beforehand of some kind, as there is no break in the bond 
numbers issued when the $250,000 dividend and alleged sale of 
$250,000 in bonds are taken together. For example, L. S. Buck- 



CHICAGO STREET RAILWAYS. 103 

ingham is charged with receiving bonds i to 10, inclusive, and a 
certificate for $800, on December 4, 1882, as a dividend, and on the 
same date is credited with having paid the company $10,000 for 
bonds 11 to 20, inclusive, and $800 for another certificate of that 
amount. In the same manner E. Buckingham received bond 21 
and a certificate for $700 as a dividend, and bond 22 and a certifi- 
cate, also for $700, in exchange for $1,700 in cash, and so on 
throughout the list of shareholders. 

It is unfortunate that the ledger prior to January 1, 1883, is 
missing, as it would throw considerable light on the subject. 

Sec. 3 — Stock Speculations. 
The original capital stock of the North Chicago Street Rail- 
road Company was $5,000,000 subscribed for as follows : 

United States Construction Company 49,990 shares 

C. T. Yerkes 2 shares 

Hiram Crawford 2 shares 

Andrew Crawford 2 shares 

Wm. D. Meeker 2 shares 

W. L. Elkins 2 shares 

Total 50,000 shares 

This stock was paid for entirely by the United States Con- 
struction Company, as follows: On October 15, 1886, the board 
of directors passed the following resolution: 

Whereas, the United States Construction Company has made a demand for a 
payment of $1,500,000 on account of the contract made between these two com- 
panies on the 24th of May, 1886; therefore be it 

Resolved, That the said payment is hereby ordered and made payable on the 
25th day of October, 1886. 

On October 25, 1886, or the date mentioned, construction ac- 
count is debited $1,500,000 and the above-named subscribers cred- 
ited with having paid the same aggregate amount, or 30 per cent. 
of their subscriptions. On January 10, 1887, another payment to 
the United States Construction Company is authorized, amounting 
to $1,000,000, and on January 12, 1887, another credit amounting 
to 20 per cent, is given on the above subscriptions. On April 11, 
1887, another payment of $1,250,000 is ordered made to the United 
States Construction Company, and, on the same day, 25 per cent, 
of the stock subscription is credited to the subscribers. 

In the meantime, the United States Construction Company had 
undertaken a new contract for $750,000, that of January 12, 1887, 



104 MUNICIPAL AFFAIRS. 

fully explained elsewhere, and on August 23, 1887, received the 
first payment thereon on account, the funds with which to make 
the payment being the proceeds of three notes negotiated as fol- 
lows: 

August 15, 1887, Commercial Natonal Bank $250,000 

August 23, 1887, Illinois Trust & Savings Bank 150,000 

August 23, 1887, C. T. Yerkes 100,000 

Total $500,000 

On November 18, 1887, another payment of $500,000 was or- 
dered made to the United States Construction Company on ac- 
count of the original cable contract of May 24, 1886, and on No- 
vember 21, 1887, the last two payments, aggregating $1,000,000, 
were credited on the above subscriptions, completing all except 
$250,000 due the United States Construction Company, which last 
amount was paid February 2y, 1888, by a final resolution of the 
board of directors authorizing the payment of a like sum to the 
Construction company in final settlement of the contract of May 
24, 1886. 

It will be noticed that prior to January 12, 1887, only 30% had 
been paid on account of the capital stock and that half of the total 
amount due remained to be paid after that date; nevertheless it 
would seem that the stock had already been delivered to the United 
States Construction Company, for, on January 12, 1887, when the 
second payment ($1,000,000) is credited to the United States Con- 
struction Company on account of its subscription, making a total 
of $2,500,000, a dividend of 2,\ per cent, on $3,000,000, or $75,000, 
was paid to George D. Widener, Treasurer of the United States 
Construction Company. Considering that only $1,500,000 had 
been with the company from October 25, 1886, to the date of the 
dividend, or January 12, 1887, 2 months and 17 days, the dividend 
was actually at the rate of 24 per cent, per annum on the sum paid 
in. 

The dividend referred to was the first one declared by the 
North Chicago Street Railroad Company and amounted in the ag- 
gregate to $125,000, or 2-J per cent, on the entire capital stock of 
the company. Another dividend of 2\ per cent, was declared June 
22, 1887, and one of 3 per cent., or $150,000, was declared Decem- 
ber 22, 1887, all before the capital stock was fully paid for, and, 
presumably, before any of it had been delivered to the subscribers. 



CHICAGO STREET RAILWAYS. 105 

Particular attention is called to the fact that it was not until 
June 15, 1888, that there was any distribution of the $500,000 in 
stock of the new company among the stockholders of the old com- 
pany, and such may have been the case; nevertheless, I find that 
the first dividend paid by the new company, that of January, 1887, 
was distributed as follows: 

Being 2}4 

Dividends, per cent, on 

Jan. 11, 1887, C. L. Hutchinson $500.00 $20,000 

Jan. 12, 1887, Geo. D. Widener, Treas. U. S. Con. Co 75,000.00 3,000,000 

Jan. 14, 1887, Chas. H. Ferry, Trustee 37-50 1,500 

Jan. 14, 1887, C. A. Spring, Jr 50.00 2,000 

Jan. 15, 1887, Chas. B. King 150.00 6,000 

Jan. 15, 1887, Andrew Nelson 120.00 4,800 

Jan. 15, 1887, Geo. E. Adams 170.00 6,800 

Jan. 15, 1887, Adele F. Adams 67.50 2,700 

Jan. 15, 1887, Nancey S. Foster 250.00 10,000 

Jan. 15, 1887, Julia F. Porter 125.00 5,000 

Jan. 15, 1887, S. M. James 250.00 10,000 

Jan. 15, '1887, T. S. Phillips 125.00 5,000 

Jan. 15, 1887, Mary H. Jones 125.00 5,000 

Jan. 15, 1887, Wm. N. Phillips 125.00 5,000 

Jan. 15, 1887, Mrs. Annie G. Moore 125.00 5,000 

Jan. 17, 1887, Eliza V. Rumsey 5.00 200 

Jan. 17, 1887, M. F. Blair, Chauncy J. Blair, Cyrus H. 

Adams, Trustees 252.50 10,000 

Jan. 18, 1887, Lorenzo G. Woodhouse 62.50 2,500 

Jan. 20, 1887, I. N. Maynard 90.00 3,600 

Jan. 22, 1887, Mrs. R. McM. Gillespie 215.00 12,600 

Jan. 25, 1887, Mrs. Sarah Morris 37-50 1,500 

Jan. 26, 1887, Edward Waller 1 12.50 4,500 

Jan. 27, 1887, Chas. T. Yerkes 80.00 3,200 

Jan. 27, 1887, Hiram Crawford 12.50 500 

Jan. 27, 1887, Robt. Macfeely 137-50 5,500 

Feb. 1, 1887, E. M. Mayo 125.00 5,000 

Feb. 1, 1887, Clara C. Hollis 62.50 2,500 

Feb. 5, 1887, P. A. B. Widener 190.00 7,600 

Feb. 5, 1887, W. L. Elkins 192.50 7,700 

Feb. 5, 1887, Geo. D. Widener, Treas 1,230.00 49,200 

Feb, 25, 1887, W. R. Willing 77.50 3,100 

Mch. 12, 1887, J. J. Mitchell, Pres 250.00 10,000 

Mch. 15, 1887, S. B. Cobb 50.00 2,000 

Mch. 19, 1887, Thos. Howard 250.00 10,000 

Mch. 23, 1887, Chas. H. Ferry 17.50 700 

Mch, 23, 1887, Mary A. W. Ferry 30.00 1,200 

Apr. 15, 1887, Robt. Glendening 125.00 5,000 

Apr. 30, 1887, P. A. B. Widener 2,085.00 83,400 

Apr. 30, 1887, W. L. Elkins 2,085.00 83,400 

Apr. 30, 1887, C. T. Yerkes 2,082.50 83,300 

May 2, 1887, U. S. Construction Co 37,500.00 1,500,000 

May 27, 1887, Mary A. W. Ferry, Trustee 25.00 1,000 

July 1, 1887, W. C. Goudy 5.00 200 

July 1, 1887, Jno. Doe 217.50 8,700 

July 1, 1887, Clara F. Bass 67.50 2,700 

July 1, 1887, L. M. Ferry 7.50 300 



Totals $125,000.00 $5,000,000 



106 MUNICIPAL AFFAIRS. 

As before stated, there is no record that any of the capital 
stock was distributed among the stockholders of the old company 
until June 15, 1888, and it may be merely a coincidence that 22 out 
of the 46 names in the above list were stockholders in the old com- 
pany, and held just one-half the number of shares in the old com- 
pany that they are credited with above ; nevertheless, the fact that 
these names appear at all among the stockholders of the new com- 
pany and receiving dividends before the stock was fully paid for, 
and all payments being made credited to other persons, would in- 
dicate, at least, that the stock had been issued prematurely, and 
was being trafficked in before the United States Construction Com- 
pany had a clear paid-up title to it. 

The issue of the stock to the United States Construction Com- 
pany before being earned by the North Chicago Street Railroad 
may likewise have a very important bearing in deciding the ques- 
tion as to whether or not the same thing was done on the West 
Chicago Street Railroad Company, as may be inferred from a con- 
sideration of that subject elsewhere in this report. 

Sec. 4. — Total Expenditures* 

The total expenditures of this company from May 24, 1886, to 

December 31, 1897, outside of operating expenses, were $16,797,- 

520.97, divided as follows: 

For betterments on account North Chicago City Ry. Co $7,922,331.89 

For 2,501 shares of stock North Chicago City Ry. Co 1,500,600.00 

Bonus paid to shareholders North Chicago City Ry. Co 500,000.00 

Total on account of North Chicago City Ry. Co $9,922,931.89 

Balance on its own account 6,874,589.08 

Total $16,797,520.97 

The details of its expenditures on its own account are as 

follows : 

10.713 miles S. T. new horse road at $22,478.26 $240,809.60 

10.713 miles S. T. new horse road converted into elec- 
tric road at 14,428.15 154,567-67 

12.014 miles S. T. new electric road at 20,311.13 244,017.92 

Buildings 448,463.77 

Land 199,958.20 

Equipment 836,651.65 

Car machinery (on hand Dec. 31, 1897) 13,021.19 

Grip car tools, " 1,068.87 

Stationary registers, " 12,590.84 



CHICAGO STREET RAILWAYS. 107 

Horses, " 9320.02 

Supplies, " 32,920.81 

Bonds, " 1,399,650.00 

Stocks, " , 10,500.00 

Bills receivable, " 1,897400.00 

Accounts receivable, " 221,520.61 

Cash and cash items, " 554,225.16 

Suspense, " 22,092.58 

Railway expenses to Dec. 31, 1897 250,099.41 

Miscellaneous items charged into construction account : 

Car Heaters 8,373.78 

Building repairs 758.44 

Car repairs 3,800.00 

Wagon for Fire Apparatus 160.00 

Gas and Water Rent 531.28 

Water Pipe 67.79 

Patent Cases 875.00 

Love Traction Co 7,656.27 

Discount on Bonds 35-315-00 

Frontage 10,679.35 

City Inspection 1,338.75 

Hose Bridge and Lift 456.10 

Garfield Barn fire 8,036.63 

Contributions 2,000.00 

Chicago Times 144.00 

Printing 29.81 

Legal Expenses 2,257.06 

Electric light 52.80 

Gas pipe line 4,260.93 

Wells Street improvements 1,980.76 

Horse depreciation 80,000.00 

Corn depreciation 6,437.03 

Loan to Garden City Construction Co 150,000.00 325,210.78 

Total $6,874,589.08 

The details of the disbursements for buildings were as follows : 

Hobbie St. electric power house, at Hawthorne Ave. and Hobbie St. . . . $377,480.80 

High Ridge car house, at N. Clark St., near Homan Ave 6,363.38 

Halsted St. car barn, at Lincoln Ave., near Halsted St 16,351.68 

La Salle Ave. station 7,857.59 

Graceland Ave. car house 28,675.87 

Sheffield Ave. machine shops 6,041.60 

Lincoln and Sheffield Ave. waiting room 5,692.85 

Total $448,46377 

The pieces of land purchased by the company between May 24, 
1886, and December 31, 1897, were (1) site of Hobbie Street power 
house, (2) site of Halsted Street barn, (3) site of machine shop on 
Sheffield Avenue north of Fullerton Avenue. These pieces are 
represented by the item, "Land, $199,958.20," in the above 
schedule. The company has purchased other pieces of land, but 
the sum paid in each case is carried in the cash balance of $554,- 
225.16 as a cash item on hand December 31, 1897. The pieces 



108 MUNICIPAL AFFAIRS. 

referred to are: Site High Ridge car house; one lot, Larrabee 
Street; site Graceland Avenue car house, Graceland and South- 
port ; 386 and 390 Dearborn Avenue ; Belleplaine and Lincoln Ave- 
nues ; loop, Sheffield and Lincoln avenues. 

In converting the 10.713 miles single track horse road into 
electric road, the old street pavement then down, being practically 
new, was relaid. The original cost value of this pavement was 
$63,024.36 and is incorporated into the total cost value of the ex- 
isting 22.?2y miles single track electric road now owned by the 
N. C. S. R. R. Co. The detailed cost of this section of road (22.727 
miles) is as follows : 

Per Mile. 

Overhead and underground electrical construction $170,435.81 $7,499-31 

Paving 133,702.51 5,882.98 

Rails, 85 lbs 95,32363 4J94-29 

Miscellaneous material and labor 62,148.00 2,734.55 

1 — - ■"— — -^^— -^— — — — — -~ 

Totals $461,609.95 $20,311.13 

The distribution of the cost of paving was as follows: 

Granite, 18,956.36 Sq. yards, at $2.00 $37,912.72 

Wood, 55,386.44 Sq. yards, at 1.00 55,386.44 

Cobble, 32,322.52 Sq. yards, at 1.25 40,403-35 

Totals. ..106,665.32 $133,702.51 

Sec* 5, — Original Cost of Present Assets. 

The cost value of the property owned by the North Chicago 

Street Railroad Company and existing on December 31, 1897, was 

as follows: 

22.727 miles S. T. electric road, at $20,311.13 $461,609.95 

Real estate 199.958.20 

Buildings 448,463.77 

Equipment : 

182 Box cars, at $900 $163,800 

39 Box cars, at 700 27,300 

4 Box cars, at 500 2,000 

222 Open cars, at 725 80,475 

64 Open cars, at 500 32,000 

7Z Grip cars, at 650 47,45° 

141 Box motor cars, at 1,000 141,000 

130 Open motor cars, at 825 107,250 

3 Mail motor cars, at 900 2,700 

16 Sweepers, at 300 4,800 

1 1 Snow plows, at 400 4,400 

12 Salters, at 200 2,400 

6 Sprinklers, at 250 1,500 

29 Other vehicles, at 300 8,700 

625,775.00 



CHICAGO STREET RAILWAYS. 109 

Car machinery 13,021.19 

Grip car tools 1,068.87 

Stationary registers 12,590.84 

Horses 9,820.02 

Storehouse supplies 32,920.81 

Wagon for fire apparatus 160.00 

Due from Garden City Construction Co 150,000.00 

Cash and cash items 554,225.16 

Bonds : 

N. Chi. City Ry. 4 r / 2 per cent $110,000 

' N. Chi. St. R. R. 5 per cent 10,000 

N. Chi. St. R. R. debentures 532,900 

Chi. Passenger Ry. Co 714,000 

First Regiment 2,000 

Dubuque Building 4,750 

Times-Herald 25,000 

Garfield Building 1,000 

1,399,650.00 

Stocks : 

Ferris Wheel $10,000 

N. Chi. St. R. R 500 

10,500.00 

Bills Receivable: 

W. P. Nixon, 12/19/91 6,300 

J. J. West, 2/14/89 16,000 

Chas. Henrotin, 4/9/92 40,000 

Ed. Koch, 10/29/92 15,000 

Electric Park Am. Co., 5/7/06 50,000 

Columbian Const'n Co., 3/9/97 50,000 

J. R. Bickerdike, 7/29/97 10,000 

West Chi. St. R. R., 8/31/97 25,000 

" " 11/10/97 100,000 

" " 12/10/97 10,000 

" " 12/10/97 10,000 

" " 12/10/97 15,000 

" " 11/15/97 50,000 

West Chi. St. R. R. Tunnel Co 1,500,000 

1,897,400.0© 

Accounts receivable 221,520.61 

Suspense 22,092.58 

Total $6,060,777.00 

showing a depreciation of $813,912.08, to which should be added 
$500,000 paid to the stockholders of the North Chicago City Rail- 
way Company, and the $1,500,600 paid for the 2,501 shares of 
stock of the same company, since it is shown elsewhere that the 
property of that company on December 31, 1897, was only $2,109,- 
399.13 in excess of its outstanding bonds, and which excess is not 
sufficient to secure the claim of the North Chicago Street Railway 
Company for $7,922,331.89. The stock, therefore, in case of a 
termination of the lease and settlement between the companies 



110 MUNICIPAL AFFAIRS. 

according- to the express terms of the lease, has no secured value. 
Adding the amount collectible from the lessor company ($2,- 
109,399.13) to the cost value of the other property of the lessee 
company ($6,060,777.00) makes the total assets of the lessor com- 
pany $8,170,176.13. 

Sec. 6. — Present Liabilities* 

Against this there are outstanding liabilities as follows : 

First mortgage 5 per cent, bonds $3,171,000.00 

Debenture bonds, 6 per cent 1,260,000.00 

Certificates of indebtedness, 6 per cent 500,000.00 

Real estate mortgage (assumed) 15,000.00 

Bills payable 2,370,200.00 

Conductors' and drivers' deposits 22,274.00 

Employes' deposits 42,209.00 

Dividends unpaid 325.00 

Wages unpaid 125.22 

Coupons unpaid 15,515.00 

Accounts payable 10,946.86 

Total $7407,595.08 

leaving $762,581.05 to secure the $6,600,000 outstanding capital 
stock of the company. 

Sec. 7« — Stock, Bonds and Dividends* 

The capital stock of this company was originally $5,000,000, 
and the first issue of bonds $1,500,000. The circumstances in re- 
gard to the issue and disposition of these particular securities have 
already been fully set forth on a preceding page. 

The mortgage under which the bonds were issued provides 
that additional bonds may be issued from time to time for new con- 
struction, but only to the extent of 75 per cent, of the actual cost 
of the new construction. Under this provision $227,000 new bonds 
were issued in 1887, $100,000 in 1888, $523,000 in 1889, $63,000 
in 1890 and $758,000 in 1896, a total of $3,171,000, including the 
original issue of $1,500,000. These bonds are dated July 1, 1886, 
mature January 1, 1906, and bear 5 per cent, interest. 

By resolution of the board of directors December 8, 1890, 
there were issued on January 21, 1891, $500,000 debentures ma- 
turing January 1, 191 1, and bearing 6 per cent, interest. Addi- 
tional debentures were issued in '95 and '96, maturing January 1, 
191 5, and bearing 6 per cent, interest, amounting in the aggregate 
to $1,260,000. 



CHICAGO STREET RAILWAYS. Ill 

The first lot, $500,000, issued in 1895, was used as collateral 
security for loans to the company. On January 15, 1896, another 
lot, $210,000, was authorized by the board of directors, but not for 
immediate issue. They were "to be held until officers think proper 
to use same in interests of company." Another lot, $550,000, was 
authorized December 28, 1895. 

The first lot, issued in 1895, was subsequently redeemed and 
was on hand, in the vault, January 1, 1898. Of the $210,000 lot, 
$177,100 were sold, the remainder, $32,900, being also on hand 
January 1, 1898. The $550,000 lot was given to the stockholders 
as a dividend in 1896, together with $550,000 new stock. 

Prior to that date, or on January 21, 1893, the first increase 
in the capital stock was authorized, being for $500,000. This 
stock was sold to the old stockholders as of record February 23, 
1893, at par. The market value of the new stock immediately after 
its issue was $286 per share. Its issue at par under the circum- 
stances was therefore equivalent to an extra dividend of 18 6-10 per 
cent, to the old stockholders on the $5,000,000 capital already 
outstanding. 

On December 28, 1895, another increase in the capital stock 
was authorized, this time for $1,100,000. At the same meeting an 
extra dividend of 20 per cent., payable half in new stock and half 
in debentures maturing in 191 5, was declared. The remaining 
$550,000 new stock authorized was sold to stockholders of record 
January 6, 1896, at par. Immediately after the issue of the new 
stock its market value was quoted on the Chicago Stock Exchange 
at $238 per share bid. 

The premium on the $550,000 new stock sold, the market value 
of the $550,000 given to the old stockholders, and the $550,000 
debentures at par made a total extra dividend of 47 6-10 per cent, 
on the $5,500,000 stock then outstanding. 

The total of the extra dividends above referred to was $3,548,- 
000. The total of the regular dividends paid to stockholders of the 
North Chicago Street Railroad Company was $5,764,253.50. The 
dividends from May 24, 1886, to December 31, 1892, both regular 
and extra, averaged 6.86 per cent per annum. From January 1, 
1893, to December 31, 1897, they averaged 25.24 per cent per an- 
num, including the bonuses on new stock issued at par. 



112 MUNICIPAL AFFAIRS. 

Under the terms of the lease of May 24, 1886, a guaranteed 
dividend of 30 per cent, per annum has been paid on the $249,900 
outstanding stock of the North Chicago City Railway Company. 
The first payment of this character was made July 1, 1886, and 
quarterly thereafter. The total to December 31, 1897, is $822,670. 

The aggregate profit received by the stockholders of both 
companies from May 24, 1886, to December 31, 1897, is $10,- 

i34,9 2 3-5o. 

The total assets of both companies on December 31, 1897, 
were $17,339,508.02, and the total liabilities, exclusive of capital 
stock, $16,576,926.97, leaving net assets of only $762,581.05 to rep- 
resent $7,100,000 capital stock. 

Upon this small surplus, dividends, amounting to $866,913, 
were paid in 1897, being at the rate of 113.68 per cent, per annum. 

The bonded and mortgage debt of the companies was $7,943,- 

000, upon which the annual interest charge is $407,415, as follows: 

North Chi. City Ry $500,000, at 6% $30,000 

North Chi. City Ry 2,497,000, at 454% 112,365 

North Chi. St. R. R 3,171,000, at 5% 158,550 

North Chi. St. R. R 1,775,000, at 6% 106,500 

Totals $7,943,000, at 5.13% $407,415 

The North Chicago Street Railroad Company has also out- 
standing $2,434,683 other interest bearing debt, but the interest 
paid by the company on this debt is more than offset by the interest 
received on $3,307,550 interest earning securities owned by the 
company. As the interest thus received is credited to the same 
account as that to which the interest paid out is charged, the net 
balance of this account only appears in the annual statements as a 
charge against the earnings. 

The net balance for 1897 was $196,824.52, which is at the rate 
of 10.9 per cent, per annum on the proceeds of bonds actually 
invested in the plant of the company. For example, the total 
assets of the company on December 31, 1897, were $8,170,176.13, 
of which $554,225.16 was cash and cash items, $5,810,562.32 bonds, 
stocks, notes and open accounts, and the balance ($1,805,388.65) 
plant, or track, real estate, buildings and equipment used in the 
operation of the road. These assets represent the proceeds of 
$4,931,000 bonds, $2,449,683 miscellaneous interest bearing debt, 
and $7*89,493.13 non-interest debt. 



CHICAGO STREET RAILWAYS. 113 

As the cost-value of the plant represents only $1,805,388.65 
of the total capital employed, it follows that the net interest of 
$196,824.52 paid out in 1897 is for the use of only that portion of 
the capital, and that income derived from the investment of the 
remaining capital should at least set off the interest paid out for its 
use. This, it will be seen, is practically the case when the cost of 
the plants of both the lessee and the lessor companies are consid- 
ered jointly. 

The capital represented by the joint plants is $6,422,298.12 
and the total net interest paid out in 1897 was $337,895.61, or $.26 
per cent, on the cost value of the plants. By reference to the 
schedule on a preceding page, showing the interest rate of the 
bonds outstanding, it will be seen that the average is 5.13 per cent, 
per annum, or very nearly the same as the rate actually paid for the 
use of the capital invested in the plants. 

The net income from the operation of the plants in 1897, after 
the payment of all expenses, including the interest charges above 
referred to, was $1,118,026.99, or 17.41 per cent, on the cost value 
of the plants. The gross earnings were $2,836,522.41, or 44.17 per 
cent, on the cost value of the plant. 

Sec* 8. — Mileage of North Side Lines. 

The mileage of the North Chicago City Railway Company 
and the North Chicago Street Railroad Company is summarized 
as follows : 

Miles S. T. 

NORTH CHICAGO CITY RAILWAY. 

Original horse road at date of lease, May 24, 1886 44774 

New horse road, built since May 24, 1886 23.067 

New cable road, built since May 24, 1886 1.862 

New electric road, built since May 24, 1886 3.626 

NORTH CHICAGO STREET RAILROAD. 

New horse road, built since lease of May 24, 1886 10.713 

New electric, built since May 24, 1886 12.014 

Total 96.056 

Changes made in the above roads since their construction are 
as follows : 

NORTH CHICAGO CITY RAILWAY. 

Original road as it existed on May 24, 1886, afterward converted into 

cable road 16.448 



114 MUNICIPAL AFFAIRS. 

Original road as it existed on May 24, 1886, and afterward converted into 

electric road 28.173 

Original horse road still remaining on December 31, 1897 0.153 

New horse road, built since lease of May 24, 1886, afterward converted 

into electric road 22.280 

New horse road, built since lease of May 24, 1886, and still remaining 

as horse road on Dec. 31, 1897 0.787 



Total changes in road 67.841 

Add new extensions since May 24, 1886. 

Cable road 1.862 

Electric road 3.626 



Present mileage (Dec 31, 1897) 73-329 

NORTH CHICAGO STREET RAILROAD. 

Original horse road built by lessee company, afterward converted into 

electric road 10.713 

Add extensions electric road 12.014 



Total extensions and present mileage 22.727 

RECAPITULATION. 

North Chicago City Ry., present mileage 73-329 

North Chicago St. R. R., present mileage 22.727 



Total 96.056 

distributed as follows : 

Feet, 

Lineal Feet Single Track. Miles S.T. 

Cable road 50,521 96,678 18.310 

Electric road 211,916.95 405,521.2 76.806 

Horse road 3,570.5 4,060.9 0.940 



266,008.45 507,160.1 96.056 



EXHIBIT IV.— CHICAGO PASSENGER RAILWAY CO. 

Sec, U — Agreements with "w% C. S. R. R, Co. 

This company was incorporated February 12, 1883. At the 
time of the lease of the Chicago West Division Railway Co., Octo- 
ber 20, 1887, its outstanding capital stock was $1,000,000, divided 
into 10,000 shares of $100 each, 7,300 of which were owned by the 
Chicago West Division Railway Co. These shares cost the Chi- 
cago West Division Ry. Co. $850,850, or $116.83 P er share, and 



CHICAGO STREET RAILWAYS. Hi 

were conveyed to the West Chicago Street Railroad Co. under the 
lease of October 20, 1887. There were also outstanding at the 
time of the lease $400,000, 6 per cent, bonds. 

The mileage of the road on October 20, 1887, consisted of 
29.79 miles of single track horse railroad. 

On November 16, 1888, this company entered into an agree- 
ment with the West Chicago St. R. R. Co. for the mutual use of 
each other's tracks. Among other stipulations being the follow- 
ing, viz. : 

The Chicago Passenger Ry. Co. to construct a double-track 
cable railroad on Desplaines St. between Washington St. and 
Austin Ave. ; on Washington St. from Desplaines St. through the 
Washington St. tunnel to Franklin St. ; single track on Franklin 
St. to Madison St. from Washington St., and single track on 
Washington St. from State St. to Franklin St. 

West Chicago St. R. R. Co. to use the above named tracks in 
common with the Chicago Passenger Ry. Co., and as considera- 
tion to pay to the Chicago Passenger Ry. Co. the entire cost of the 
construction and also 5 per cent, per annum upon the amount 
which shall be paid out by the Chicago Passenger Ry. Co. in re- 
building and repaving the Washington St. tunnel. 

West Chicago St. R. R. Co. to provide for the traction of the 
cars of the Chicago Passenger Ry. Co. through the tunnel and 
around the loop and charge therefor a reasonable sum to be agreed 
upon. 

The contract to continue for 50 years. But on March 15, 
1889, this contract was amended as follows: 

The West Chicago St. R. R. Co. stipulates to construct the 
cable roads mentioned with the exception that the double track on 
Desplaines St. shall be from Washington St. to Milwaukee Ave. 
instead of to Austin Ave. The cost and expense of construction of 
tracks, excepting the cable tracks covered by said agreement of 
November 16, 1888, as herein modified, and the cost and expense 
of all the permanent improvements and extensions provided for 
in this agreement, shall be paid for in the following manner: 

The said Passenger Ry. Co. shall issue its bonds, interest not 
to exceed 6 per cent., to an amount sufficient to fund the floating 
indebtedness of said Passenger Ry. Co., and to pay for the im- 



116 MUNICIPAL AFFAIRS. 

provements which said Passenger Ry. Co. has constructed to make 
or is under obligation to make, and also such bonds as it shall be 
necessary to issue to pay for any construction, permanent improve- 
ments or extensions, which shall be made for said Passenger Ry. 
Co. by said Street Railroad Co. under this agreement, and from the 
proceeds of the sale of said bonds the Passenger Ry. Co. shall fund 
all its floating indebtedness and also pay the Street Railroad Co. 
for all construction, permanent improvements or extensions, sav- 
ing the construction of cable tracks specified in said agreement of 
November 16, 1888. 

The agreement of November 16, 1888, was also modified to re- 
lease the Chicago Passenger Ry. Co. from the obligation to pay 
for the traction of its cars and also to release the West Chicago 
St. R. R. Co. from the payment of 5 per cent, per annum of the cost 
to rebuild and repair the Washington St. tunnel, because the Chi- 
cago Passenger Ry. Co. was to pay for the improvements by the 
issue of its bonds and the West Chicago St. R. R. was to guaran- 
tee the interest on the same. 

In consideration for these modifications the West Chicago St. 
R. R. Co. stipulates to pay the Chicago Passenger Ry. Co. $25,000 
semi-annually, being 5 per cent, on the outstanding capital stock. 

The agreement also stipulated that the West Chicago St. R. R. 
Co. was to receive the gross receipts and pay all the operating ex- 
penses of the Chicago Passenger Ry. Co. from March 15, 1889. 

See* 2* — Operations under Agreements. 

On June 8, 1889, the Chicago Passenger Ry. Co. decided to is- 
sue $1,000,000 6 per cent, consolidated mortgage bonds, $400,000 
to be set aside to redeem the 1st mortgage bonds for the same 
amount then outstanding. The balance was disposed of, but in 
what manner I have been unable to learn, except that part were 
sold by the West Chicago St. R. R. Co. and the proceeds, $70,- 
309.75, applied in part payment of $104,737.66 due the West Chi- 
cago St. R. R. Co. for betterments down to December 31, 1894, 
the balance ($34,426.91) being carried forward until May 9, 1896, 
when, with other accumulations on account of betterments, an- 
other settlement was made by arbitration, referred to more partic- 
ularly further on. 



CHICAGO STREET RAILWAYS. 117 

On July i, 1890, both the Chicago West Division Ry. Co. and 
the West Chicago St. R. R. Co. "relinquished all control and 
direction of the 7,300 shares of stock of the Chicago Passenger Ry. 
Co., leaving the same in the hands of trustees for the use and 
benefit of the stockholders of this company, so far as their interests 
may appear, as individuals, etc.," and on July 14, 1890, Mr. Yerkes 
was "requested to accept the trust hereby created." 

These were the 7,300 shares specifically included in the sched- 
ule of property to be turned over to the West Chicago St. R. R. 
Co. at the time of its lease of the Chicago West Division Ry. Co. 
as part of the property of the last named company. 1 

On May 14, 1888, the president of the West Chicago St. R. R. 
Co. was authorized to guarantee all contracts which may be made 
by the Chicago Passenger Ry. Co. with the U. S. Construction Co. 
I have not been able to learn to what this refers unless to the 
construction of the original cable system on such streets as the 
Chicago Passenger Ry. Co. and not the West Chicago St. R. R. Co. 
was specifically authorized by ordinance to use. 

The joint agreement of November 16, 1888, specifically re- 
quires the Chicago Passenger Ry. Co. to construct the cable sys- 
tem on Desplaines St., Washington St. and through the Washing- 
ton St. tunnel, etc., etc., but provides that the West Chicago St. 
R. R. Co. shall pay the entire cost. 

The amended agreement of March 15, 1889, confirms this stip- 
ulation but also recites that the Chicago Passenger Ry. Co. shall 
issue its bonds "to pay for the improvements which said Passenger 
Ry. has contracted to make or is under obligation to make, and also 
such bonds as it shall be necessary to issue to pay for any con- 
struction, permanent improvements or extensions which shall be 
made for said Passenger Ry. Co. by said Street R. R. under this 
agreement." 

Not having been able to gain access to the books of the Chi- 
cago Passenger Ry. Co. or of the U. S. Construction Co., I am 

1 As a matter of fact, they never were actually in possession of the West Chi- 
cago St. R. R. Co., having been, by express resolution of the Board of Directors of 
that company on November 29, 1887, delivered direct to Mr. Yerkes by the Chicago 
West Division Ry. Co. — at least 7,270 shares were so delivered, the remaining 30 
shares being delivered "to such person or persons as Mr. Yerkes may name." On 
December 14, 1887, it was, however, decided that Mr. Yerkes should hold the entire 
7,300 shares. 



118 MUNICIPAL AFFAIRS. 

unable to state what, if any, improvements were made to the 
property of the former company independent of such as were 
made by the West Chicago St. R. R. Co. and appear on the books 
of the latter company, but some obligation of that character seems 
to be referred to in the joint agreement. 

On February 26, 1892, the Chicago Passenger Ry. Co. pur- 
chased Lot 7, B. 47, Original Town of Chicago, with improve- 
ments thereon, from C. T. Yerkes and J. B. Parsons for $100,000, 
which sum was paid over to the West Chicago St. R. R. Co., and 
that company assumed the mortgage of $10,000, which then ex- 
isted on the property. A lease of this property for 99 years had 
previously been secured by the West Chicago St. R. R. Co. 

On March 19, 1896, the directors of the Chicago Passenger 
Ry. Co. and the West Chicago St. R. R. Co. were unable to come 
to an agreement as to the amount due the former for betterments 
made on account of the latter Company, and decided to refer the 
matter to Geo. A. Yuille and M. C. McDonald as arbitrators. On 
May 9, 1896, the arbitrators reported the amount due $789,990.07, 
as follows : 

12th St., East of California Ave $48,650.39 

East Harrison St 2,950.40 

Electrical construction 197,484.33 

Track and paving 194,495-45 

Cable and conduits 96,409.50 

Proportion of Western Ave. power house 250,000.00 

Total $789,990.07 

All these improvements were made between January 1, 1896, 

and the date of the report, and were therefore of an electrical 

character. 

Sec 3* — Stock and Bond Issues. 

In the anticipation of this settlement the directors of the Chi- 
cago Passenger Ry. Co. had, on March 3, 1896, voted to increase 
the capital stock from $1,000,000 to $2,000,000, and on April 8, 
1896, the two companies entered into an agreement that if the 
Chicago Passenger Ry. Co. would sell the new stock and apply 
the proceeds, so far as necessary, towards reimbursing the West 
Chicago St. R. R. Co. for the above disbursements, then the lat- 
ter company would undertake to pay to said Chicago Passenger 
Ry. Co., or to distribute the same among the respective share- 
holders of said increased capital stock, $25,000 on the 15th day of 



CHICAGO STREET RAILWAYS. 119 

September, 1896, and semi-annually thereafter on the 15th days of 
March and September of each and every year a like amount of 
$25,000, payments to continue for the same period as payments of 
a like amount and for the same purpose mentioned in the amended 
agreement of March 15, 1889, the purpose being to guarantee a 
uniform annual dividend of 5 per cent, on the entire issue of $2,- 
000,000, including the new issue of $1,000,000, of capital stock of 
the Chicago Passenger Ry. Co. 

The West Chicago St. R. R. Co. undertook to float the new 
stock, but notwithstanding the guaranteed 5 per cent, dividend 
there was apparently no market for it, only 1,163 shares being 
disposed of at seventy-five cents on the dollar, or for an aggregate 
of $87,225 cash. 

This apparently lead the directors of the Chicago Passenger 
Ry. Co. to decide upon the issue of more bonds with which to 
pay their debt to the West Chicago St. R. R. Co., for on March 29, 
1897, a new Consolidated mortgage for $2,000,000, bearing 5 per 
cent, interest, was authorized, $400,000 being set aside to retire the 
outstanding 1st mortgage 6 per cent, bonds for the same amount, 
and $600,000 being set aside to retire the outstanding 6 per cent, 
consolidated mortgage bonds of June 8, 1889. Of the remaining 
bonds, $734,000 was paid over to the West Chicago St. R. R. Co. 
as a partial settlement of the claim of the latter company under 
the award of the arbitrators of May 9, 1896. 

As before stated, only $70,309.75 of the proceeds of the $600,- 
000 6 per cent, consolidated mortgage bonds of June 8, 1889, were 
received by the West Chicago St. R. R. Co. In what way the bal- 
ance was disposed of I am unable to say, except that $100,000 was 
paid for Lot 7, Block 47, Original Town of Chicago, as before 
stated, although the amended agreement of March 15, 1889, re- 
quired that "the said Passenger Ry. shall issue its bonds, interest 
not to exceed 6 per cent., to an amount sufficient to fund the 
floating indebtedness of said Passenger Ry. Co., etc.," which 
would seem to indicate the manner in which the bonds were dis- 
posed of, although it is very probable that some of them were used 
to divide the accumulated surplus of the company among the old 
stockholders at the date of the agreement of March 15, 1889, as 
was done in the case of the Chicago West Division Ry. Co. at the 
time of its lease to the West Chicago St. R. R. Co. 



120 MUNICIPAL AFFAIRS. 

The company experienced the same difficulty in substituting 
its $600,000 5 per cent, bonds for the outstanding 6 per cent, bonds 
for the same amount as in floating the new stock, and was obliged 
to issue $224,000 of the new stock as a bonus to secure the retire- 
ment of the old 6 per cent, consolidated bonds. 

On April 12, 1897, the directors of the West Chicago St. R. R. 
Co. passed a resolution guaranteeing the principal and interest of 
the $2,000,000 5 per cent, consolidated bonds of the Chicago Pas- 
senger Ry. Co. of the issue of March 29, 1897, and on the same 
date, by mutual agreement, the term of the lease of March 15, 1889, 
was extended 50 years from March 14, 1904, making the full term 

65 years. 

Sec. 4. — Original Cos Assets. 

As the books of that company are inaccessible, the actual cost 
of construction is likewise unobtainable, but the approximate cost 
may be obtained in connection with the outstanding capital stock 
and bonds of the company on November 16, 1888, which were: 
Capital stock, $1,000,000; 1st mortgage bonds, $400,000; total, 
$1,400,000. 

After the lease of this road by the West Chicago Street R. R. 
Co., the latter company built 4.40 miles of additional single track 
horse railroad at a cost of $104,737.66, or $23,825.68 per mile. At 
the same rate per mile the cost of 29.79 miles would be $709,767.01, 
which would leave $690,232.99, less $29,030, for 37 horse-cars 
known to have been turned over to the West Chicago St. R. R. Co., 
to represent the other property turned over under the lease, in- 
cluding the real estate and buildings. 

During 1888 and 1889, Z^S miles of the original mileage were 
converted into cable road, the estimated cost of which is given else- 
where, 0.075 miles were transferred to the Chicago City Ry. Co. 
and 28.585 miles, including the 4.40 miles built by the West Chi- 
cago St. R. R. Co., were converted into electric road. 

There remains of the original horse railroad 2.38 miles, rep- 
resenting a cost value of $56,705.12, or $23,825.68 per mile. 

The cost to convert the 28.585 miles of horse railroad into elec- 
tric road was as follows: 

2.01 miles at $24,204.17 per mile $48,650.39 

26.575 miles at $18,573.46 per mile 493,589-OS 



Total $542,240.07 



CHICAGO STREET RAILWAYS. 121 

The track and paving of 26,575 miles cost at $7,318.75 per mile 1 194,495.45 

Electrical construction 26,575 miles at $7,431.21 per mile 197,484.33 

Cable and conduits, 28,585 miles at $3,372.76 per mile 96,409.50 

Miscellaneous, 26.575 miles at $195.87 per mile 5,200.40 

Proportionate cost of Western Ave. power house was $250,000, or $8,745.85 per 
mile, for 28.585 miles of single track. 

The total cost of the Western Ave. power house was $520,- 
455-65- The proportion charged to the Chicago Passenger Ry. Co. 
($250,000) was the amount agreed upon by the arbitrators in their 
report of May 9, 1896. This amount seems too high for the follow- 
ing reasons: 

The total mileage *of electric roads on the West Side is 173.73 miles single 
track, including the 28.585 miles of Chicago Passenger Ry. single track referred 
to above. The mileage on the North Side is 147.07 single track. The total mile- 
age of all three roads is 320.8 miles single track. 

The power to operate these roads is obtained from three different power 
houses, viz: Western Ave., California Ave. and Hawthorne Ave., but without 
respect to the particular company to whom the power houses belong, the California 
Ave. power house, for example, furnishing power to the North and West Side 
lines as well as to the Chicago Electric Transit Co., to which company it belongs. 
On the other hand, the power houses at Western Ave. on the West Side and Haw- 
thorne Ave. on the North Side supply power to other roads, the total mileage sup- 
plied altogether by these two power houses being greater than the combined 
mileage of the North Chicago St. R. R. Co. and the West Chicago St. R. R. Co., 
including that of the Chicago Passenger Ry. and Chicago West Division Ry. com- 
panies, to-wit: 320.8 miles single track. 

The cost of Western Ave. power house, exclusive of the land on which it is 
built, which was formerly the site of the car shops of the Chicago West Division 
Ry. Co., and conveyed to the West Chicago St R. R. Co. under the lease of 
October 20, 1887, was $520,455.65, as heretofore stated, $155,535-55 for the building 
and $364,920 for the machinery. The cost of the Hawthorne Ave. power house, 
including the land and machinery, was $377,480.80. Total for both $897,936.45, or 
$2,800 per mile. Even if an estimate of $150,000 is placed upon the 126.4x2,219.6 
ft. of land upon which the Western Ave. power house stands and added to the 
total cost the cost per mile of electric single track is not increased $500, so that 
the first cost of $8,745.85 per mile for 28.585 miles of single track given above 
is, therefore, unreliable as a basis for computing the cost per mile, as it seems 
entirely out of proportion to the total mileage operated. 

Of the original $814,504.67 first cost of the 29.79 miles single 

track horse railroad existing at the time of the lease and of the 

1 The lineal feet of street covered by the 28.585 miles of track is 64,627 
feet and the square yards of street paving amount to 114,892.4, divided as follows: 
Granite, 15,194.7; cedar, 11,946.6; oak, 11,164.4; cobble, 76,586,7. 

The average cost per square yard, new, has been : Granite, $2 ; cedar, $1 ; oak, 
$2, and cobble, $1.25. 

Exactly how many square yards of new paving is represented in the item ©1 
$194,495.45 for track and paving, I am unable to state, but if the 114,892.4 square 
yards of street were laid new and at the rates named the total cost would have 
been $217,828, or at the rate of $17,796.41 per lineal mile. 



122 MUNICIPAL AFFAIRS. 

4.40 miles built subsequently, there remains 2.38 miles, which cost 
$56,705.12, leaving $757,799-55 to represent depreciation in cost 
value because of the subsequent charge to to construction ac- 
count of the cost to construct and entirely distinct and different 
kind of road in its place, all of the cost of the old road being prop- 
erly chargeable to profit and loss. 

Of the 3.15 miles of single-track horse railroad converted into 
cable road, all but 0.314 of a mile, forming part of the State St. 
loop extension, was reconstructed by the U. S. Construction Co., 
and the whole was to be paid for, under the lease, by the West Chi- 
cago St. R. R. Co., as part of the consideration to be paid by the 
lessee company. For reasons that will be apparent, however, it is 
necessary to consider the cost of reconstructing the 2.836 miles in 
connection with the cost of constructing the entire cable system. 

As elsewhere stated, the cost per mile of the Blue Island Ave. 
and Halsted cable road was $96,455.43, and it is fair to presume, 
in the absence of any definite information to the contrary, that the 
construction having been done at very nearly the same time, the 
2.856 miles was built at approximately the same cost per mile, or 
an aggregate of $273,547.60. 

The 34.115 miles single-track railroad existing on November 
31, 1897, represented, therefore, a total investment of $1,677,- 
411,29, as follows: 

2.836 miles single track cable $273,547.60 

0.314 miles single track cable 43715-51 

2.38 mile* single track horse railroad 56,705.12 

28.585 miles single track electric railroad 542,240.07 

Real estate and buildings 761,202.99 

Total $1,677,411 .29 

Sec, 5, — Liabilities at Present, 

Against this there was outstanding on December 31, 1897: 

First mortgage 6 per cent, bonds $400,000.00 

Consolidated 5 per cent, bonds 1,334,000.00 

Capital stock 1,340,300.00 

Due West Chicago St R. R 49,158.49 

Total $3,123,458.49 

showing outstanding liabilities in excess of the cost value of the 
property to the extent of $1,446,047.20. 

A reappraisement of the real estate of this company will doubt- 
less reduce this excess to a considerable extent, as I understand its 



CHICAGO STREET RAILWAYS. 123 

fair market value is greater than the oustanding bonds of the com- 
pany. 



EXHIBIT V.— CHICAGO WEST DIVISION RAILWAY CO. 

Sec, J.— Early Operations. 

This company was incorporated February 21, 1861. On Oc- 
tober 29, 1887, its board of directors approved a lease of the road 
to the West Chicago St. R. R. Co. for 999 years, the same to take 
effect as of October 20, 1887. The particulars of this lease will be 
found more fully set forth in Exhibit V. 

Its capital stock on October 20, 1887, was $1,250,000, which 
remains the same at the date of this report. Its bonded indebted- 
ness is $4,070,000, 1 st mortgage 4^ per cent. 40-year bonds, dated 
July 1, 1892, which were issued by resolution of the board of di- 
rectors May 28, 1892, to retire $4,040,000 certificates of indebted- 
ness of various dates and one note for $30,000 secured by trust 
deed for certain real estate, all of which were outstanding at the 
date of the lease except as elsewhere fully set forth in this report. 

The lease between this company and the West Chicago St. R. 
R. provides that in anticipation of the termination of the lease at 
any time or for any cause, and "for the purpose of preserving the 
necessary information for an intelligent accounting * * * an 
account of the cost of all permanent improvements to the property 
demised" shall be kept. 

But such disbursements of the character mentioned as have 
been made since the date of the lease have not been kept distinct 
and separate from the disbursements of the lessee company on its 
account, as may be inferred from the response of the management 
to a former request of your committee for "the itemized cost of 
all buildings and equipping of new lines and extensions, whether 
owned or leased, etc.," the response being that "it is impossible 
to give statement as asked for itemized, as the construction and 
equipping of new lines has been charged to the general construc- 
tion account, the total cost of which since the opening of the road 
has been $9,334,395- I 6." 



124 MUNICIPAL AFFAIRS. 

Not only has it been necessary to analyze the general con- 
struction account of the West Chicago St. R. R. Co. for a com- 
plete list of the expenditures for permanent improvements on ac- 
count of the Chicago West Division Ry Co., but a comprehen- 
sive knowledge of the acts of that company can likewise only be ob- 
tained by an examination of the corporate acts of the lessee com- 
pany, those of the lessor company being practically dictated by the 
lessee company. For that reason reference is had to that part of 
this report considered under the heading "West Chicago St. R. R. 
Co." for any further general information concerning the Chicago 
West Division Ry. Co. and to Exhibit 6 for such information con- 
cerning the expenditure for permanent improvements as has been 
disclosed by this examination. 

Sec. 2. — Financial Condition in 1887* 

The mileage of this road on October 20, 1887, the date of its 
lease to the West Chicago St. R. R. Co., was 98.45 miles of single 
track, the cost of constructing which was $1,935,131.52, or $19,- 
655.98 per mile. 

This comparatively low cost at the time referred to was, I am 
informed, due principally to two causes: (1) it had been the prac- 
tice of this company for several years prior to its lease to the 
West Chicago St. R. R. Co. to pay for extensions and better- 
ments out of its surplus earnings, and (2) only two streets — Madi- 
son St. and Randolph St. — representing 14 miles out of the total 
98.45 miles of single track, were paved and that mostly with cheap 
macadam. 

The company possessed real estate and buildings, representing 
a cost of $449,158.73 and $927,984.00 respectively. It also owned 
492 box or closed cars and 301 open cars, which cost $658,456, and 
4,243 horses, for which $567,599 had been paid, or an average of 
$134 each. Its engines and machinery cost $18,459, snow-plows 
$9,170, omnibuses $9,172.20, stable furniture $6,105.16, office fur- 
niture and fixtures $3,695.77, harness $10,423.70, wagons $2,- 
430.90, altogether a total of $4,597,785.98, representing property 
regularly employed in the operation of its road or connected there- 
with, and all of which was conveyed to the West Chicago St. R. R. 
Co. under the lease of October 20, 1887. 

In addition it owned certain notes and bonds representing an 



CHICAGO STREET RAILWAYS. 125 

outlay of $14,430, and certain open accounts representing $5,- 
005.19. 

It also owned 7,300 shares of the Chicago Passenger Ry. Co. 
capital stock, for which it had paid $850,850.00, which were also 
transferred to the West Chicago St. R. R. Co. under the lease, mak- 
ing the total cost value of the property transferred to the latter 
company $5,448,635.98. 

Against this it had outstanding liabilities at the time as follows : 
Capital stock, $1,250,000; certificates of indebtedness, $2,987,500; 
SufTern note, $30,000; total, $4,267,500. It had other liabilities, but 
in the settlement under the lease they were not assumed by the 
lessee company. For example, there were outstanding bills pay- 
able amounting to $437,940.86, accrued interest on bonds $56,- 
291.68, conductors' and drivers' deposits $21,125, taxes accrued 
$31,679, and certain accounts payable $1,974.52, making total lia- 
bilities of every character $4,816,511.06, against total assets of 
every character $5,468,071.17, and showing a net surplus of $651,- 
560.11 on October 29, 1887. 

Sec. 3. — Transfer of Property under Lease. 

This surplus belonged to the stockholders of the Chicago West 
Division Ry. Co., and in the division and transfer of the assets and 
liabilities under the lease it became necessary to devise some 
method by which it could be distributed among the stockholders. 
In order to make the distribution and secure funds for the imme- 
diate payment of the $549,011.06 floating debt not assumed by the 
lessee company, it was decided to issue $1,052,500 additional cer- 
tificates of indebtedness, making the total amount $4,040,000. 

The remaining sum necessary to effect the liquidation was se- 
cured by means of the following settlement with the West Chicago 
St. R. R. Co., viz. : 

Payments made by Chicago West Division Ry. Co. for ac- 
count of the West Chicago St. R. R. Co.: 

Operating expenses, Sept., Oct. and Nov., 1887 $408,977.17 

Operating expenses, Dec, 1887 153,264.42 

Taxes 6,709.73 

Interest coupons 5 per cent. Jan., 1888 86,000.00 

Interest coupons 6 per cent. Dec., 1887 (one half) 7,125.00 

Sundry bills 2,280.00 

Salaries of officers 12 days in Jan., 1888 821.JBJ 



126 MUNICIPAL AFFAIRS. 

37 passenger cars (Chicago Passenger Ry.) 29,030.00 

Advanced on note of West Chicago St. R. R. Co 150,000.00 

Total 1 $844,208.20 

Credits allowed West Chicago St. R. R. Co. : 

Sept., Oct. and Nov., 1887, receipts $714,622.84 

One-third taxes for 1887 11,720.36 

Interest 5 per cent, certificates, July 1 to Sept. 1, 1887 28,666.67 

Interest 5 per cent, certificates, Jan., 1888 5,000.00 

City of Chicago water bill 127.65 

Cash 25,816.68 

Sum stipulated in lease to be paid by Chicago West Division Ry. Co. . . 37,500.00 

Total $823,454.20 

Balance due Chicago West Division Ry. Co $20,754.00 

This balance was paid by the assumption by the West Chicago St. R. R. Co. 
of the amount due conductors and drivers on account of their deposits with the 
Chicago West Division Ry. Co., by which assumption these deposits were trans- 
ferred to the lessee company and became a liability of that company, thereby reduc- 
ing the amount of the floating debt to be paid by the Chicago West Division Ry. 
Co. in the final settlement 

Sec 4* — Operations under Lease. 

After the lease of this road to the West Chicago St. R. R. Co. 
1.96 miles of new single-track horse railroad extension were built 
by the last named company for or on account of the lessor com- 
pany, the cost of which, so far as the books show it distinct from 
the general disbursements, on construction account, is obscure, 
but the cost was evidently the same as other horse-railroad being 
built at that time, viz. : $23,825.68 per mile. 

This small extension, with 66.72 miles of the original 98.45, 
was afterward converted into electric railroad, a total of 68.68 miles 
of single track, at a cost of $825,163.04, or $11,985.48 per mile. 

Of the remaining track 450 feet on Lake St. from Wabash 
Ave. to State St. was transferred to the Chicago City Ry. Co. to 
form part of their cable loop ; 33,054.7 feet, or 6.26 miles, still re- 
mains as horse railroad, representing an original cost value of 
$123,046.43, and 134,018.6, or 25.38 miles, has been converted into 
cable road, for a part of which the exact cost is uncertain, as else- 
where explained in this report. 

For that part known as the Blue Island Ave. & Halsted St. 
cable line, extending from Western Ave. to Halsted St. on Blue 
Island Ave. and from the junction of Blue Island Ave. and Halsted 
St. on Halsted St. to O'Neill, and on O'Neill to the car barns ; from 



CHICAGO STREET RAILWAYS. 127 

Blue Island Ave. to Van Buren St. on Halsted, and on Van Buren 
through the tunnel and around the loop, a distance of 11.655 miles 
single track, the cost was $1,124,188.06, or $96,455.43 per mile, 
independent of the cable power house at 12th St. and Blue Island 
Ave., which cost $233,290.50 for the land and buildings and $173,- 
240.47 for the machinery, and of the Van Buren St. power house, 
which cost $142,326.44 for the buildings and land and $116,627.53 
for machinery. 

The exact cost of this entire system, including real estate, 
power houses and machinery, is established, and represents a total 
investment as follows : 
11.655 miles single track cable road $1,124,188.06 

Blue Island Ave. power house j Real estate 233,290.50 

( Machinery 173,240.47 

Van Buren St. power house f Real estate 142,326.44 

( Machinery 116,627.53 

Total cost $1,789,673.00 

Of the original $1,935,131.52 first cost of the 98.45 miles of 
single-track road existing at the time of the lease, plus $46,698.51 
at the same rate per mile for the 1.96 miles built soon after, there 
remains of the total horse railroad mileage 6.26 miles single track 
and $123,046.43 of the original cost, showing a depreciation m 
value, because of the substitution of a road of a different character, 
the cost of which substitution is necessarily taken as the cost value 
of the road after the change, the sum of $1,858,783.60 chargeable 
to profit and loss. 

Sec. 5. — Assets and Liabilities Compared. 

Of the original road and extensions made since the lease then- 
existed on December 31, 1897, the following: 

6.26 miles single track horse road $123,046.43 

68.68 miles single track electric road 825,163.04 

11.655 miles single track cable road (actual) 1,124,188.06 

0.321 miles single track cable road (actual) 44,690.05 

13.404 miles single track cable road (estimated) 1,292,888.56 

100.32 miles single track $3,409,976.14 

Add Real estate, on Oct. 20, 1887 449,158.73 

Buildings, on Oct. 20, 1887 927,984.00 

Western Ave. power house 520,455.65 

Halsted St. car house alterations 11,803.70 

New building Clybourn Place 52,839-50 

Total ; $5,372,217.72 



128 MUNICIPAL AFFAIRS. 

Against this are oustanding liabilities as follows: 

Capital stock $1,250,000.00 

First mortgage bonds 4,070,000.00 

Due West Chicago St. R. R. Co 4,869,998.38 

Total $10,189,998.38 

showing a deficit of $4,817,780.66. 

This deficit, however, does not take into consideration the fact 
that in converting the 68.68 miles single-track horse road into trol- 
ley road there may have been more or less salvage in the old road 
which became incorporated into the new trolley road, the value of 
which is lost in assuming that the sum actually expended in mak- 
ing the conversion likewise represents the full cost value of the 
road as it exists at the present day. As a matter of fact, the en- 
tire street pavement of the old horse road referred to was relaid 
or continued in use as before the change, and therefore its original 
cost is properly a part of the total cost value of the new electric 
road. 

The exact amount of pavement thus relaid and its original cost 
are as follows: 

Wood, 16.603 miles by 8 feet, cost $77,923.00 

Cobble, 44.107 miles by 8 feet, cost 258,761.25 

Granite, 7.97 miles by 8 feet, cost 74,811.68 

68.68 miles Total, cost $411,495.93 

Deducting this sum from the deficit first obtained leaves as a 
final deficit $4,406,284.73, and by adding it to the sum actually ex- 
pended in making the change from horse to trolley road, to wit.: 
$825,163.04, makes the total value of the 68.68 miles single-track 
trolley road $1,236,658.97, or an average of $18,006.10 per mile. 



EXHIBIT VI.— WEST CHICAGO STREET RAILROAD CO. 

Sec U — Lease of Vest Side Lines. 

This company was incorporated July 19, 1887. Its original 
capital stock was $10,000,000, divided into 100,000 shares of $100 
each. The original subscribers and directors were: 

David Crawford, 99,497 shares; Richard C. Crawford, 500 
shares; J. Chas. Moore, 1 share; J. A. Reeve, 1 share; Burdetta C. 
Barnes, 1 share. At the first meeting of the board of directors 



CHICAGO STREET RAILWAYS. 129 

Reeve, Barnes and David Crawford resigned and Andrew Craw- 
ford, F. S. Winston and C. T. Yerkes were elected directors in 
their places. 

On November n, 1887, P. A. B. Widener, W. L. Elkins and 
Wm. H. Kemble apparently owned 6,251 shares of stock of the 
Chicago West Division Railway Company, or one share more than 
one-half the entire capital stock of the last named company. At 
the meeting of the board of directors of the West Chicago St. R. 
R. Co. on November 11, 1887, it was proposed to purchase this 
stock from Widener, Elkins and Kemble, and thereby secure con- 
trol of the road. At the same time it was proposed to lease the 
Chicago West Division Ry. in the following terms : 

Lessee to pay rental equal to 35 per cent, per annum on the 
capital stock of the lessor company, which was at that time and 
still remains $1,250,000; $109,375 P er quarter; first payment Jan. 
20, 1888. Lessee to receive the entire gross earnings from August 
31, 1887, meaning the gross passenger receipts, and $37,500 in 
cash. Lessee to assume the outstanding bonded debt of the lessor 
company, which at that time was as follows: 

Certificates of indebtedness dated March 1, 1882, 6 per cent., 20 years. . $125,000.00 
Certificates of indebtedness dated June 1, 1882, 6 per cent., 20 years.. 475,000.00 
Certificates of indebtedness dated July 1, 1887, 5 per cent., 20 years.. 3,440,000.00 

Total $4,040,000.00 

Also note for $30,000, secured by trust deed of Lot 1, Block 4, Suffern's 

Sub. S. W. *4 Sec. 6-39-14, 5 per cent, dated April 26, 1886 30,000.00 

Total $4,070,000.00 

The consideration for the lease and the 6,251 shares of stock 
was 4,100 bonds of the West Chicago St. R. R. Co., $1,000 each, 5 
per cent, 40 years (to be secured by the 6,251 shares of West 
Division stock), and $6,000,000 in cash, or capital stock, at the op- 
tion of the lessee company. 

It was stipulated in the lease that the lease itself was to bear 
date and take effect as of October 20, 1887, and continue for 999 
years ; that if the lessee took up or redeemed all or any part of the 
$4,070,000 outstanding debt the lessor company would issue new 
bonds to the lessee to take their place. Under this stipulation the 
present 'outstanding $4,070,000 1st mortgage \\ per cent, bonds of 
the Chicago West Division Ry. Co. were issued May 28, 1892. 

It was further stipulated that the lease was not transferable. 



130 MUNICIPAL AFFAIRS. 

This did not, however, apply to the Chicago Passenger Railway, 
which at that time was being operated by the Chicago West Di- 
vision Railway Company, but it was expressly stipulated that the 
inventory of the property to be turned over by the last named 
company should include the 7,300 shares of the Chicago Passenger 
Ry. Co., then owned by the Chicago West Division Ry. Co., and 
by means of which control of the property of that company was 
also secured under the lease of October 20, 1887. 

The lease also stipulated that the lessee company should build 
not less than 17 miles of cable road and "for the purpose of pre- 
serving the necessary information for an intelligent accounting be- 
tween the parties hereto" an inventory of the property transferable 
was to be made and preserved, "also an account of the cost of all 
permanent improvements to the property demised that is made by 
said lessee other than ordinary repairs, herein provided for, to be 
made by said lessee, etc." 

Sec* 2. — Construction of Cable Road* 
I have succeeded in obtaining a partial list of the property 
transferred, but for the 17.47 miles of single-track cable road built 
soon after the lease was made I have been able to find no detailed 
account such as would seem to be clearly called for by the terms of 
the lease. The records simply show that on November 17, 1887, 
the board of directors authorized the president to enter into a 
contract with the United States Construction Company to lay a 
cable road on the following streets : 

Madison St., double track, 40th St. to Desplaines or Jefferson Sts. ; Desplaines 
or Jefferson, double track, Madison to Washington St. ; Washington St., Desplaines 
or Jefferson through Washington St. tunnel to 5th Ave. ; double track and single 
track from 5th Ave. to State St. ; State St., Washington to Madison St., single 
track ; Madison St., State to 5th Ave., single track ; 5th Ave., Madison St. to Wash- 
ington St., single track; Armitage Ave., Milwaukee Ave. to barn, double track; 
Milwaukee Ave., Armitage Ave. to Desplaines or Jefferson, double track ; Desplaines 
or Jefferson, Milwaukee Ave. to Washington St., double track. 

The contract subsequently entered into specified that the Construction Company 
shall furnish all necessary passenger and grip cars; repair and put in good condi- 
tion the Washington St. tunnel and light the same; make all necessary vaults, 
changes of sewer and gas pipes, water pipes, conduits, pavements and any other 
improvements; also engines, engine houses, machinery, cables and all necessary 
changes of the cars now used on the horse railroads on said lines so to be cabled 
and any additional cars, to thoroughly equip the said cable tracks sufficient to do 
the said railroad company's business thereon. * * * In short, the said Con- 
struction Company shall furnish and do everything necessary to complete and 



CH1CAQ0 STREET RAILWAYS. 131 

equip the said cable system except furnishing the real estate on which to erect 
necessary buildings — that to be provided by the said railroad company. 

All patent rights of the Construction Company are conveyed to the railroad 
company. Work to commence within thirty days from receipt of authority from 
the City of Chicago. This authority was contained in the ordinance of March 30, 
1888. 

The consideration to be paid was $4,000,000 in cash or stock 
at the option of the West Chicago St. R. R. Co. The company 
elected to pay in stock and "to deliver the same in installments 
from time to time as the work progressed upon estimates approved 
by the president of this company." The contract required that the 
"$4,000,000 be paid in cash at once to the Construction Company. 
They to put $4,000,000 in capital stock of the West Chicago St. 
R. R. in trust as security for the completion of the contract and re- 
ceive instalments of it back on estimates of the president of the last 
named company of work done." 

Pursuant to this stipulation, Geo. E. Newlin was on Novem- 
ber 21, 1887, appointed trustee of the stock mentioned. On Octo- 
ber 22, 1890, all of this stock had been delivered to the Construc- 
tion Company by the trustee except 500 shares, and on that date 
these were ordered delivered by the board of directors and the 
Construction Company released from its contract, the same having 
been completed. 

Sec. 3. — Capital Stock Issued. 

The contract for the lease and the purchase of the 6,251 
shares of Chicago West Division Ry. Company stock from Wid- 
ener, Elkins and Kemble for $4,100,000 in 1st mortgage 5 per 
cent, 40-year bonds of the new company and $6,000,000 in cash or 
capital stock was passed and approved by the board of directors 
and stockholders on November 11, 1887, the stockholders voting 
as follows: 

C. T. Yerkes, 99,497 shares; R. C. Crawford, 500 shares; An- 
drew Crawford, 1 share; F. S. Winston, 1 share; J. C. Moore, 1 
share. 

Although the lease between the Chicago West Division Ry. 
Co. and the West Chicago St. R. R. Co. was dated October 20, 
1887, as a matter of fact the new management did not assume 
actual charge of the property until January 12, 1888. Their books 
of account, however, were opened as of December 1, 1887, and the 



132 MUNICIPAL AFFAIRS. 

receipts and disbursements from Aug. 31, 1887, subsequently 
posted. 

On the last day of December, 1887, the first entries concern- 
ing the purchase of the 6,251 shares of stock, the lease of the Chi- 
cago West Division Ry. and the contract with the U. S. Con- 
struction Company appear, and these indicate that Widener, Elkins 
and Kemble were paid $5,100,000 for the 6,251 shares of stock and 
$5,000,000 for securing the lease, and the U. S. Construction Com- 
pany $4,000,000 to construct the 17.47 miles of cable system al- 
ready referred to. At the same time Widener, Elkins and Kemble 
are charged with $6,000,000 and the U. S. Construction Company 
$4,000,000, their respective subscriptions to the capital stock of the 
West Chicago St. R. R. Co., and "Capital Stock" account is cred-. 
ited with $10,000,000 to balance the transaction on the books. 
Widener, Elkins and Kemble are then credited with having paid 
their subscription of $6,000,000 in cash and the company takes 
credit with having paid them also in cash $1,000,000 on account of 
the 6,251 shares of Chicago West Division stock and $5,000,000 
on account of the lease of the Chicago West Division Ry. 

In the same manner the U. S. Construction Company is cred- 
ited with paying its stock subscription in cash, and as an offset is 
charged with receiving the same amount in cash on account of the 
contract to construct the cable system already referred to. 

The effect and obvious intent of these entries is to make it ap- 
pear from the records that the capital stock was sold for cash and 
incidentally that the transaction in stock was entirely distinct and 
independent of the contract for the construction of the cable sys- 
tem, the purchase of the 6,251 shares of Chicago West Division Ry. 
Co. stock and the lease of the last named road; the fact that the 
contracting parties in each instance were identical was a mere coin- 
cidence without special significance. 

The improbability that any of the capital stock was disposed of 
for cash may be inferred from several collateral facts. 

(1) It was expressly stipulated in the lease and in the cable 
construction contract that payment might be made in cash or capital 
stock at the option of the Railroad Company, which reservation, 
though not conclusive in itself, is presumptive that payment was 



CHICAGO STREET RAILWAYS. 133 

made in capital stock, being the most convenient and economical 
form of payment. 

(2) The parties to whom the West Chicago St. R. R. Co. was 
indebted being likewise indebted to the West Chicago St. R. R. 
Co. in precisely the same sum, one obligation being offset by the 
other, the most natural supposition is that the simplest and most 
direct method of settlement was adopted, which would have been 
to exchange the stock for receipted vouchers representing pay- 
ments on account of the construction contract, lease, etc. 

(3) Four millions of capital stock was placed in the hands of 
Geo. E. Newlin, as trustee, to be paid over to the U. S. Construc- 
tion Co. in installments as work progressed on the cable system. 

The total cost of the cable system, according to the contract, 
was not to exceed four million dollars, and so far as the "Con- 
struction" account shows this entire sum was paid to the U. S. 
Construction Company in cash in advance of any work done by that 
company; thereupon the latter company returned the money to 
the West Chicago St. R. R. Co., in payment of its subscription, 
receiving in return the $4,000,000 capital stock referred to above, 
which it deposited in trust as a guarantee that it would complete 
the construction of the cable system. 

Aside from the unusual character of the guarantee — the 
amount on deposit at all times being more than sufficient to cover 
any loss that the West Chicago St. R. R. Co. might sustain by be- 
ing compelled to relet the contract — it will be noticed that the 
stock itself is supposed to have been paid for with the $4,000,000 
received from the West Chicago St. R. R. Co. 

A careful examination of the books of the company shows 
that at no time prior to or approximating the date of the cable 
contract, November 17, 1887, was tne West Chicago St. R. R. Co. 
in possession of so large a sum as $4,000,000 in cash, and there- 
fore could not have made any such payment to the U. S. Construc- 
tion Co. 

It had only its $10,000,000 in capital stock with which to pay 
for anything. Its first issue of bonds ($4,100,000) had not yet 
been printed, and in fact were not authorized till April 9, 1888, and 
it had not yet come into actual possession of the property or funds 
of the Chicago West Division Ry. Co., and therefore could not 



134 MUNICIPAL AFFAIRS. 

make use of the receipts of that company from August 31, 1887, 
which under the lease were to be turned over. 1 

It is very plain that no such sum in cash was paid to the U. 
S. Construction Co. by the West Chicago St. R. R. Co. as stated in 
its books, and it is equally clear that the $4,000,000 in stock de- 
posited in trust by the U. S. Construction Co. was not paid for at 
the time of its deposit, and therefore the instalments of stock sub- 
sequently paid over to the U. S. Construction Co. by the trustee 
from time to time were not a release of any part of the supposed 
guarantee deposit but actual payments in stock for work done as 
it progressed. 2 

The only entry in the books to show the payment of $4,000,000 
for the cable system is that of December 31, 1887, as already 
stated, and as that could not have been paid in cash it is fair to 
presume that it was paid in stock, the only available means the 
company possessed at that time of paying any such sum. 

Immediately the stock was issued and became a liability of the 
company, it was necessary to offset it with an entry on the other 
side of the ledger, and this was done by opening "Construction" 
account and debiting it at once with $4,000,000, although there was 
nothing in the way of tangible property to show for it. 

Sec, 4. — Payment for Negot Siting Lease* 

The supposed receipt of $6,000,000 in cash from Widener, 
Elkins and Kemble, in full payment of their subscription to the 
capital stock, and the immediate repayment of the money to them 
— $5,000,000 on account of the lease which they had negotiated 
and which had been signed and approved by both parties, by the 
lessor on October 29, 1887, and by the lessee on November 11, 
1887, and $1,000,000 in advance for the 6,251 shares of Chicago 
West Division Ry. Co. stock which they were to deliver — are en- 
tries of a similar character, although the money or a cheque for 

1 Even if it had been in possession, the gross receipts from August 31, 1887, to 
December 31, 1887, when the transfer was made, without any deduction for operat- 
ing expenses in the meantime, were less than one-quarter the sum supposed to have 
been paid in cash to the United States Construction Company prior to December 
31, 1887. 

* In this connection it may be well to call attention to the absence of any provi- 
sion in the contract for the forfeiture of the whole or any part of the guarantee 
deposit for non-fulfillment of the contract, which in itself rendered the supposed 
guarantee of no value, and under the circumstances was useless, since the deposit 
would revert to its proper owner in that contingency. 



CHICAGO STRE ET RAILWAYS. 135 

$6,000,000 might have actually been passed back and forth, but the 
improbability and inutility of such a movement is plain, since it 
was needless to effect a set-off in the accounts. 

It is not part of my functions to enter into the question of the 
reasonableness of the charge of $5,000,000 for simply negotiating 
the lease between the two railroad companies, one of which al- 
ready controlled the acts of the other by reason of its ownership of 
a majority of the capital stock or for which ownership provision 
had already been made, but simply to state the facts as I find them. 
At the same time it would be impossible to pass over such a pay- 
ment for services without comment, especially as the necessity for 
such service on the part of outside parties is not in the remotest 
degree apparent. 

So far as the entries in the books are concerned, no attempt is 
made to conceal the payment of $5,000,000 to Widener, Elkins and 
Kemble for negotiating the lease, although a consolidation of ac- 
counts two years after the payment may have had that for its ob- 
ject. Up to December 31, 1890, an account was carried on the 
ledger showing a debit balance of $5,000,000 under the title 
"Leasehold." On that date it was closed out and the balance 
transferred to a new account entitled "Cable Road, Power Station, 
Lease and Equipment," and to the same account was transferred 
$4,000,000 from the general "Construction" account, making a 
total to the debit of that account of $9,000,000, which has been 
carried through the trial balances of the company each year since. 

So far as this entry affected the construction account, it ex- 
plicitly states that it is made "so that 'Construction' account will 
show the expenditures for new work other than that done by the 
U. S. Construction Co.," which is correct. 

The payment of $1,000,000 to Widener, Elkins and Kemble, 
however, seems to have been premature and forced, as the con- 
tract for the delivery of the 6,251 shares of Chicago West Division 
Ry. Co. shares allowed them two years from November 11, 1887, in 
which to make the delivery; and the $4,100,000 of 1st mortgage 
bonds, the principal part of the consideration, were not author- 
ized until April 9, 1888, and not delivered to them until May 15, 
1888. 

A careful scrutiny of all the entries in the books, and con- 



136 MUNICIPAL AFFAIRS. 

sideration of all the circumstances in connection with the issue of 
the capital stock and bonds, leads me to believe that the sole pur- 
pose of the promoters was to gain possession of the entire capital 
stock of the company in advance of the delivery of the 6,251 shares 
of West Division stock and the commencement of the work of in- 
stalling the proposed cable system. The redepositing of $4,000,- 
000 of the stock under the pretext of guaranteeing the completion 
of the cable contract was, in effect, the return of that much stock 
to cover the cost of construction, but the $6,000,000 retained by the 
promoters evidently represented their profits. 

Sec. 5. — Mr. Yerkes* Interpretation of the Lease. 

The precise distinction on the books in recording the issue of 
the stock to Widener, Elkins and Kemble and the U. S. Construc- 
tion Co., and the exact division of the stock and bonds between 
them and for the purposes shown by the books of account, have, in 
my judgment, no real significance, as all of these parties were, to- 
gether with the management of the West Chicago St. R. R. Co., 
practically one and the same institution, with interests in common 
and controlled by the same motive from long association. 

Furthermore, Mr. Yerkes' own explanation of the circum- 
stances accords with this supposition: 

"With the object in view of accomplishing a certain end, two contracts were 
made. That end was that Elkins, Widener and Kemble and the United States Con- 
struction Company were to furnish to the West Chicago Street Railroad Company 
6,251 shares of West Division stock and a cable plant. 

"It was agreed between the parties in interest that for the cable plant the rail- 
road company was to pay $10,000,000 in cash or stock, and for the 6,251 shares of 
West Division stock $4,100,000 of first mortgage bonds. 

"At the time the contracts were made the railroad company insisted that $10,- 
000,000 of stock should be delivered only as the work progressed and on engineers' 
certificates. This did not suit the plans of Elkins, Widener and Kemble, who in- 
sisted that they should receive at least one-half of the stock before the work com- 
menced, so that they could arrange with some of their associates for money. 

"Finally the railroad company agreed to give them $6,000,000 of stock at once 
and $4,000,000 of stock as the work progressed. 

"The contracts were made in accordance with this arrangement. The contract 
was made with the construction company for $4,000,000 of stock, and with Elkins, 
Widener and Kemble for $6,000,000 of stock and $4,100,000 of bonds, the object 
being to place the matter in such a position that the stockholders of the West 
Chicago Company could not complain that the stock was delivered before value was 
received by the railroad company. 

"As the construction company and Elkins, Widener and Kemble were the same, 
they were willing to take it in this way. 



CHICAGO STREET RAILWAYS. 137 

"Of course there had to be some consideration given for the delivery of this 
$6,000,000 of stock. That consideration was named in the contract as obtaining the 
lease. 

"In making the entries for these different items, the terms of the contracts were 
held to. Really the agreement was that the railroad should pay $10,000,000 of stock 
for the work done. 

"I would say, further, that the $6,000,000 of stock which Elkins and Widener 
received went to the United States Construction Company, the United States Con- 
struction Company using it in payment of the work." 

In the absence of the books of the U. S. Construction Co. it is 
difficult to state what the actual cost of the cable plant was. Ac- 
cording to Mr. Yerkes, the cost was $7,800,000, leaving $2,200,000 
to cover any discount at which the stock may have been disposed 
of by the Construction Co. and the profit to the promoters. 

In the case of the North Chicago St. R. R. cable plant, the 
actual cost is stated to have been $4,200,000. In that instance the 
plant consisted of n^ miles of single-track road and necessary 
power houses, etc., while in the case of the West Chicago St. R. R. 
plant 17.47 miles single track cable road, etc., were built, which at 
$7,800,000 would seem to indicate that the difference in cost is ap- 
proximately in proportion to the difference in mileage. But this 
is not conclusive, for obvious reasons. 

I have made every endeavor to obtain access to the books of 
the U. S. Construction Co., in order to ascertain the exact cost of 
both plants, and have suggested that it was in the interests of the 
companies themselves to show beyond question that the West Side 
system cost $7,800,000 and the North Side $4,200,000, as claimed, 
but without success. 1 

1 From Mr. J. C. Moore, the present secretary and treasurer of the North Chi- 
cago Street Railroad Company, who kept the Chicago books of the United States 
Construction Company during the period of construction, I learned that most of the 
purchases of iron and other heavy material and the making and payment of sub- 
contracts were made directly from the Philadelphia office of the company, and there- 
fore do not appear on the Chicago books ; and that the latter books contain the dis- 
bursements for labor only, and therefore would afford no satisfactory information 
as to the total cost. These books were forwarded to Philadelphia when the work 
was completed. I have asked for these books, nevertheless, or for the privilege of 
examining the general books of the company in Philadelphia. 

Mr. Yerkes consented to my request, and he not only consented but actually pro- 
duced every book and paper accessible which I have called for, although indisposed 
to do so in the beginning of my investigation, and, I understand, wrote to Mr. 
Widener at Philadelphia, requesting for me the privilege of examining the construc- 
tion company's books. A few days later he informed me that he had received word 
from Mr. Widener that he (Widener) did not know where the books were. 

I am indisposed to believe that Mr. Yerkes has otherwise than stated the truth 
in this effort to obtain access to the books mentioned, as it is clearly in his interest 
to produce the records in support of his statements, since the result of my examina- 



138 MUNICIPAL AFFAIRS. 

Sec* 6* — Market Value of "West Division Railway Stock. 

In the course of my investigation I obtained from Mr. Webb, 
the secretary, an official statement of the net profits of the Chicago 
West Division Ry. Co. for the ten months preceding its lease to the 
West Chicago St. R. R. Co., which seems to show the basis upon 
which the guaranteed rental of 35 per cent, per annum was after- 
wards made. 

From this statement it would appear that the net profits for the 
period mentioned were $364,161.85, or at the rate of 35 per cent, 
per annum on the capital stock of $1,250,000. On a 5 per cent, 
basis this would give the stock a market value of $700 per share, 
or an aggregate of $8,750,000, and 6,251 shares would represent a 
market value of $4,375,700. 

According to the contract with Widener, Elkins and Kemble, 
the West Chicago St. R. R. Co. paid $5,100,000 for 6,251 shares, or 
at the rate of $815.86 per share. This accords with the sworn 
statement of the company filed with the New York Stock Exchange 
at the time of listing the securities, but is in conflict with Mr. 
Yerkes' own statement, quoted above, that the $4,100,000 first 
mortgage bonds were issued in payment of the 6,251 shares of West 
Division stock. 

Considering the importance of this information in determining 
the value received by the company in return for its securities, it is 
necessary to briefly state a few reasons for believing that the aver- 
age price paid the actual owners of these shares was between $655 
and $656 per share. 

It will be remembered that the West Chicago St. R. R. Co. was 
not incorporated till July 19, 1887; nevertheless the 1896 issue of 
the Economist Street Railway Supplement states, as coming from re- 

tion thus far shows an apparently excessive profit to the promoters of the North and 
West Side roads. But as it is a matter of public notoriety that for several years he 
has not been on the most friendly terms with his former colleagues, it is therefore 
not unreasonable to presume that his influence with them is less than formerly. They 
certainly cannot have the same motive for submitting their private acts to public 
scrutiny. 

As regards Mr. Yerkes himself, this report will show, without the necessity of 
making the statement, that I have had access generally to all the facts concerning 
his companies, and that my examination covers practically their whole history from 
their inception down to January 1, 1898. In no case have I been satisfied to accept 
information from him or any of his subordinates except where I have subsequently 
had the opportunity of verifying it by reference to the records themselves. In all 
cases where I have received information without such verification, the circumstances 
are explicitly stated herein, as well as the reasons for introducing it 



CHICAGO STREET RAILWAYS. 139 

liable authority, that one month earlier, or "in June, 1887, negotia- 
tions were closed between Chas. T. Yerkes and his associates and 
the officers of the Chicago West Division Ry. Co., by which Mr. 
Yerkes acquired 6,251 shares, or one more than a majority of the 
capital stock outstanding. The price paid was $650 a share, ar- 
rangements being made for the payment of that amount in several 
installments." 

The first proposition presented to the West Chicago St. R. R. 
Co. for the purchase of these shares was on November n, 1887, 
and according to the terms agreed upon, Widener, Elkins and 
Kemble were given two years in which to make delivery, which 
would seem to indicate that the desired number of shares was yet 
to be acquired by them. 

As the action of the market price for some time before and 
after this date has a direct bearing upon the price paid, it may be 
stated that on June 12, 1886, the quotations on the Chicago Stock 
Exchange were $400 per share bid and $425 asked. These were 
the ruling quotations for the balance of the year 1886. On May 
2y } 1887, or one month before the deal was closed, according to the 
Economist's supplement, the price bid was $475 and $600 asked. As 
late as December 30, 1887, the price asked was $700 per share, with 
no bidders. This was the highest price asked for the shares at any 
time up to the close of the year 1887, so far as the public quotations 
show, and would indicate that if the officers of the Chicago West 
Division Ry. Co. were in a position to guarantee the delivery of 
6,251 shares as early as June, 1887, the price stipulated did not ex- 
ceed an average of $656. Even if the transaction was still open 
after that date, the price, in any event, did not exceed $700 per 
share, the highest quotation reached on the Chicago Stock Ex- 
change, if such quotations are any indication of the exchange value 
of the stock. 

As the range of prices asked was from $600 on May 27, 1887, 
to $700 on December 30, 1887, it naturally follows that the average 
price was between the two, and as $4,100,000 in bonds was issued on 
the deposit of 6,251 shares, this would make the average value of 
each share a little less than $656, which was undoubtedly the aver- 
age price paid for it. 

A strong reason for presuming that the average price paid for 



140 MUNICIPAL AFFAIRS. 

the stock was the basis for the issue of the bonds is the fact that 
that was the plan previously adopted in the first issue of bonds by 
the North Chicago St. R. R. Co. ; in fact, the whole general plan of 
financing both roads was precisely similar except in this single in- 
stance, if the assumption set forth above is incorrect. 

The statement of Mr. Yerkes that the entire original capital 
stock of $10,000,000 was set aside to pay for the cable system, and 
that the actual cost was $7,800,000, makes it safe to presume that 
the usual profit of 20 per cent, was contemplated on the estimated 
cost. Furthermore, nothing is said in the lease of November 17, 
1887, about $1,000,000 in capital stock being set aside as part pay- 
ment of the 6,251 shares of West Division stock, all of which seems 
to show that $4,100,000 in bonds was issued to provide the funds 
with which to pay for the 6,251 shares of West Division stock and 
$1,000,000 in stock was charged to the cost of these shares, in 
order to allow the promoters a profit of that amount for negotiat- 
ing the sale. 

However desirous Mr. Yerkes and his associates may have 
been to secure control of these shares, it is reasonable to suppose 
that there was a limit to the price they were willing to pay for them, 
and this limit was undoubtedly the earning power of the road 
itself. As has already been stated, the net earnings for the first ten 
months of 1887 were $364,161.85, or at the rate of 35 per cent, per 
annum on the capital stock. That rate was actually guaranteed on 
the 6,249 shares of outstanding free stock, and by depositing the 
6,251 shares in trust and issuing $4,100,000 5 per cent, bonds 
against them the transaction was equivalent to a guarantee of 35 
per cent, on the 6,251 shares also. To have issued $5,100,000 in 
bonds would have increased the guarantee more than the property 
was earning, which would have been to assume a risk inconsistent 
with sound financiering, particularly as interest had also to be 
earned on the new capital to be invested in developing the 
property. 

This fact would seem to show more than anything else, that 
even if Widener, Elkins and Kemble were the actual owners of the 
entire 6,251 shares, and not merely the holders of an option on all 
or a portion of them, the price which they paid to obtain them did 
not exceed $4,100,000 in the aggregate, and as the $1,000,000 in 



CHICAGO STREET RAILWAYS. 141 

stock paid them (in addition to the $4,100,000 bonds) did not rep- 
resent any outlay in money on their part, they could well afford to 
waive any immediate share in the earnings of the company until 
such time as, under their management, the property could be made 
to develop additional earning power. 

As only $14,100,000 in stock and bonds were issued, if $5,100,- 
000 were paid for the 6,251 shares of Chicago West Division Ry. 
Co. stock, according to the books, then only $9,000,000 could have 
been set aside for the construction of the cable system, which is 
$1,000,000 less than Mr. Yerkes claims. And if the presumption is 
that Mr. Yerkes desires to make the profits of the promoters ap- 
pear as little as possible, he loses an advantage of $1,000,000 by 
adhering to the statement that $10,000,000 and not $9,000,000 was 
the correct amount, for it would seem much more probable that 
whatever was paid out for the 6,251 shares of West Division stock 
went to the original owners of that stock than that the promoters 
added anything to the cost for their own benefit, especially as there 
was no particular necessity of concealing so comparatively small a 
sum as $1,000,000 for what might, under some conditions, be a 
reasonable charge for their services in securing control of the Chi- 
cago West Division Ry. when they were at no pains to conceal a 
charge of $5,000,000 for practically the same service in giving ex- 
pression to that control in a formal lease of the road. 

Sec. 7» — Value of West Chicago Street Railway Stock. 

Considering that the earnings of the road were fully mort- 
gaged by the guaranteed rental of 35 per cent, on the capital stock 
of the Chicago West Division Ry., leaving the prospective increase 
in earnings to take care of the $10,000,000 new capital of the West 
Chicago St. R. R. Co., it has suggested itself to me that possibly 
the last named stock was not considered as worth par at the time 
of its issue, or, if sold in the market to provide funds to construct 
the proposed cable system might not have realized the full $10,- 
000,000 in cash. 

Such a supposition finds no support in the official records of 
the Chicago Stock Exchange, as the earliest quotation of the stock 
of the West Chicago St. R. R. Co. was on June 14, 1889, to-wit: 
103 asked and 102J bid. There is nothing to show that it possessed 
any lower value at any time previous unless such an assumption 



142 MUNICIPAL AFFAIRS. 

may be drawn from the report of the treasurer of the company for 
the year 1888, read at the annual meeting of the stockholders on 
January 8, 1889, viz: 

Capital stock, including $4,000,000 United States Construction Company, 

held to complete contract $10,000,000 

Bonded indebtedness 4,100,000 

C. W. Div. Ry. rental $437,500 

interest 210,500 

maintenance 3,000 

Fixed charges $651,000 

Receipts, 1888 .$2,846,395.74 

Expenses, 1888 2,890,302,05 

Deficit $43,906.31 

Cash on hand January 1, 1888 $185,373.71 

Less deficit 43,906.31 

Balance on hand January 1, 1889 $141,467.40 

This report, however, does not indicate the true condition of 
the company, nor agree with the books of the company, which 
show that the gross receipts and operating expenses of the com- 
pany were as follows : 

Gross receipts $2,835,002.35 

Operating expenses 1,846,337.23 

Net from operation $988,665.12 

Deduct interest and rentals 651,994.40 

Net earnings $336,670.72 

Out of these earnings dividends had been paid at regular inter- 
vals during the year as follows: April 28, 1888, ij per cent.; July 
26, 1888, ij per cent.; November 5, 1888, i| per cent.; and at the 
meeting of the directors on February 11, 1889, a further dividend 
of ij per cent, was paid, thereby establishing the stock as a 5 per 
cent, per annum dividend paying security as early as April 28, 1888. 

Considering that the construction contract provided that work 
on the cable system should commence within 30 days of the grant- 
ing of permission by the City of Chicago, and that such permission 
was not issued till March 30, 1888, or accepted by the company 
till April 2, 1888, it is very evident that the stock had an estab- 
lished par value, if not higher, before a dollar of it was disposed of 
for the purpose of providing funds for the construction of the cable 
system. 



CHICAGO STREET RAILWAYS. 143 

Sec. 8.— Capital Expenditures, J887-J897. 

The total expenditures of this company other than operating 

expenses, that is, the sum expended in the purchase of property, 

construction and reconstruction of roads, buildings, etc., from date 

of organization down to December 31, 1897, were $29,615,628.13, 

distributed as follows : 

Chicago Passenger Railway $1,156,749.52 

Chicago West Division Railway 14,969,998.38 

West Chicago Street Railroad 13,488,880.23 

Total $29,615,628.13 

The following schedules show the details for each of the roads 
named : 

CHICAGO PASSENGER RAILWAY. 

2.836 miles single track horse road, converted into cable road by the 

U. S. Construction Company ; contract price per mile, $164,723.65 . . . $466,056.28 

0.314 mile single track new cable road, at $139,221.37 43,715-51 

4.396 miles S. T. new horse road, at $23,825.68 104,737.66 

2.01 miles S. T. horse road converted into trolley road, at $24,204.17. .. . 48,650.39 

26.575 miles horse road, S. T., converted into trolley, at $18,573.46 493,589.68 

Total $1,156,749.52 

CHICAGO WEST DIVISION RAILWAY COMPANY 

13.404 miles single track horse road converted into cable road by U. S. 

Construction Company, at $164,723.65 $2,207,955.82 

11.655 miles single track new cable road, built by West Chicago Street 

Railroad Company, at $96,455-43 1,124,188.06 

0.321 mile single track new cable road, at $139,221.37 44,690.05 

1.96 miles single track new horse road 46,698.51 

68.68 miles single track new horse road converted into trolley road, at 

$11,985.48 825,163.04 

Western avenue electric power house 520,455.65 

Halsted street car house improvements 11,803.70 

New building, Clybourn Place 52,839.50 

Miscellaneous items 36,204.05 

Total expenditures for betterments $4,869,998.38 

Add payments to Widener, Elkins & Kemble — 

For controlling interest in the stock of the Chicago West Division 

Railway Company 5,100,000.00 

For securing lease of the Chicago West Division Railway Company. 5,000,000.00 

Total $14,969,998.38 

WEST CHICAGO STREET RAILROAD. 

1.23 miles single cable road, built by U. S. Construction Company; con- 
tract price, $164,723.65 per mile $203,710.09 

Three power houses and machinery, built by U. S. Construction Co. ... . 998,277.81 

155 grip cars, built by U. S. Construction Company 124,000.00 



144 MUNICIPAL AFFAIRS. 

50.32 miles single track horse road, built by West Chicago Street Rail- 
road Company, at $22,499.57 1,132,178.36 

25.97 miles single track new trolley road, built by West Chicago Street 

Railroad Company, at $18,573.46 482,352.76 

50.32 miles single track horse road converted into trolley road, at $11,- 

98548 601,109.45 

Miscelleaneous items charged to construction account — 

Taylor street bridge $100,000.00 

Taylor street viaduct 7*654,55 

Halsted and Kedzie street viaducts 2,427.88 

Ogden avenue viaduct 7,861.90 

Milwaukee avenue viaduct 1,000.00 

Steel rails and asphalt for Madison street 52,376.18 

Franchise petitions 207,321.37 

Interest and dist on bonds 282,972.12 

661,614.00 

Equipment — 

Horse cars $29,030.00 

Grip cars, trailers, etc 962,956.01 

Electrical equipment 764,956.10 

1,7564)42." 

Machinery — 

Blue Island avenue power house $173,240.47 

Van Buren street power house 116,627.53 

Desplaines street power house 72,971.69 

Washington street power house improvements 54,685.68 

Miscellaneous 53,455-65 

470,981.02 

Electrical ronduits, Western avenue 79,112.64 

Miscellaneous property in use — 

Car heaters $32,944.56 

Registers 43,638.95 

Storehouse supplies 9,058.63 

Horses . * 29,902.50 

Telephone and signal system 3,483.80 

Car shop stock 21,108.27 

Cables 112,285.39 

Punches 69.70 

Gripmen's tools 182.54 

Hay 14294 

252,817.28 

Advance to feeder lines and connections — 

Cicero & Proviso Street Railway Company $159,510.10 

Ogden Street Railway Company , . . . 308,662.42 

Lake Street Elevated Railroad Company 20,077.15 

Chicago & Jefferson Urban Transit Company 7,911.23 

Suburban Railroad Company 18,139.31 

North Chicago Street Railroad Company 46,586.65 

North Chicago Electric Railway Company 15,250.76 

Chicago Electric Transit Company 931.22 

West Chicago Street Railroad Tunnel Company 118,236.45 

785,305-29 

Accounts receivable — 

Naugle, Holcomb & Co $856.07 

City of Chicago 2,595.25 

Suspense 8,080.75 

Sinking fund 31,000.00 

Central Trust Company of New York, to redeem cer- 
tificates of Ind 840,394-44 



CHICAGO STREET RAILWAYS. 145 

Central Trust Company of New York to redeem coupons 129,000.00 

Bank of America, New York, to redeem coupons 2,850.00 

Track depression 12,244.48 

1,027,920.99 

Bills receivable 86,969.98 

Stocks and bonds — 

West Chicago Street Railroad Debentures $3,211,000.00 

Chicago & Jefferson Urban transit bonds 54,000.00 

West Chicago Railroad Consols 15,000.00 

West Chicago Railroad stocks 22,264.00 

3,302,264.00 

Real estate and buildings — 

Prior to introduction of trolley system — 

For cable roads $644,084.59 

For horse roads 173,681.77 

$817,766.36 
Less charge to Chicago Western Division Railroad 

Company $64,643.20 

$753,123.16 

Since introduction of trolley system $670,963.48 

Miscellaneous improvements 96,557.98 

Special assessments 2,679.83 

$ 1,523,32445 

Total $13,488,880.23 

Of the property represented by the above expenditures there 
existed December 31, 1897, the following items at their original 
cost value : 

CHICAGO PASSENGER RAILWAY. 

2.836 miles single track cable road built by United States Construction 
Company; contract price, $164,723.65 per mile; estimated price, 

$96,45543 per mile $273,547.60 

0.314 mile single track cable at $139,221.37 437I5-5I 

2.01 miles single track trolley at $24,204.17 48,650.39 

26.575 miles single track trolley at $18,573.46 493,589-68 

Total $859,50318 

Showing a depreciation of $297,246.34 as follows : 4.396 miles 
new horse road torn up and trolley road built in its place ; original 
cost of horse road, 4.396 miles, at $23,825.68, total $104,737.66, and 
$192,508.68 difference between contract price and estimated cost 
of 2.836 miles cable road built by U. S. Construction Co. 

CHICAGO WEST DIVISION RAILWAY. 

13.404 miles single track cable road built by U. S. Construction Com- 
pany; contract price, $164,723.65 per mile; estimated, $96,455.43 
per mile $1,292,888.56 

11.655 miles single track cable road built by West Chicago Street Rail- 
road Company ; actual cost per mile, $96,455.43 1,124,188.06 

0.321 mile single track cable road built by West Chicago Street Rail- 
road Company ; actual cost at $139,221.37 44,690.05 



146 MUNICIPAL AFFAIRS. 

68.68 miles single track trolley road converted from horse road ; actual 

cost of converting, $11,985.48 825,163.04 

Western avenue power house, building $155,535-55 

Western avenue power house, machinery 364,920.10 

520,45565 

Halsted street car house improvements 11,803.70 

New building, Clybourn Place 52,839.50 

Total $3,872,028.56 

Showing a depreciation of $11,097,969.82 as follows: 
Difference in contract price and estimated cost of the 13.404 miles 

cable road built by the U. S. Construction Company $915,067.26 

1.96 miles single track horse road converted into trolley road; 

original cost of horse road, $23,825.68 per mile 46,698.51 

Miscellaneous expenditures covered by the above values 36,204.05 

Price paid Widener, Elkins & Kemble for 6,251 shares of Chicago 
West Division Railway Company stock; omitted as an asset 

for reasons that will appear later 5,100,000.00 

Price paid Widener, Elkins & Kemble for negotiating the lease of the 
Chicago West Division Railway Company to the West Chicago 
Street Railroad Company 5,000,000.00 

Total $11,097,969.82 

WEST CHICAGO STREET RAILROAD. 

1.23 miles single track cable road built by U. S. Construction Com- 
pany; contract price, $164,723.65 per mile; estimated price per 
mile, $06,455.43 $118,640.18 

25.97 miles single track new trolley road, complete, including street 

paving, at $18,573.46 482,352.76 

50.32 miles single track trolley road converted from horse road ; actual 
cost of converting same, $11,985.48 per mile. Total, $601,109.45. 

50.32 miles of street pavement relaid, originally part of 50.32 miles 
single track horse road torn up and replaced with trolley road. 
Total square yards, 236,168, divided as follows : 

19,712 square yards Granite at $2.00 $39,424.00 

23,607 square yards Cobble at 1.25 29,508.75 

192,849 square yards Wood at 1.00 192,849.00 

236,168 Total $261,781.75 

Add cost of converting above 601,109.45 

50.32 miles single track trolley, complete, at $17,148.08 862,891.20 

Equipment on hand December 31, 1897 — 

364 box cars at $900 $327,600 

421 open cars at $725 3°5,225 

258 grip cars at $650 167,700 

401 box motor cars at $1,000 401,000 

415 open motor cars at $825 34 2 ,375 

1 trolley partv car, $1,200 1,200 

5 mail cars at $900 4,500 

36 sweepers at $300 10,800 

49 snow plows at $400 19,600 

35 salters at $200 7,ooo 



CHICAGO STREET RAILWAYS. 147 

7 sprinklers at $250 1,750 

60 other vehicles at $100 6,000 

' , 1,594,750.00 

(The details of the remaining items, as well as the totals, are the same 

as in the schedule of expenditures given on a preceding page, 
nothing being marked from the original.) 

Machinery $470,981.02 

Electric conduits, Western avenue 79,112.64 

Three power houses and machinery built by U. S. Construction Com- 
pany (see estimate) 998,277.81 

Miscellaneous property in use 252,817.28 

Due from feeder lines and connections 785,305.29 

Accounts receivable 1,027,920.99 

Bills receivable 86,969.98 

Stocks and bonds 3,302,264.00 

Miscellaneous real estate and buildings 1,523,324.45 

Total $11,585,607.60 

Total expended, West Chicago Street Railroad Company $13,488,880.23 

Total cost value of property existing December 31, 1897 11,585,607.60 

Depreciation $1,903,272.63 

Following are the details of the depreciation: 
Difference in contract price and estimated cost of the 1.23 miles single 

track cable road built by the U. S. Construction Company $85,069.91 

50.32 miles single track horse road converted into trolley road ; original 
cost, $1,132,178.36. Deduct for street pavement relaid. .$261,781.75 

870,396.61 

Depreciation in equipment 286,192.11 

Miscellaneous items charged to construction account 661,614.00 

Total $1,903,272,63 

SUMMARY. 

Total expendi- Cost value assets 

tures. December 31, 1897. Depreciation. 

Chicago Passenger Railway $1,156,749.52 $859,503.18 $297,246.34 

Chicago West Division Railway. 14,969,998.38 3,872,028.56 11,097,969.82 

West Chicago Street Railroad.. 13,488,880.23 11,585,607.60 1,903,272.63 

Totals $29,615,628.13 $i6,3I7,I39-34 $13,298488.79 

Sec. 9. — Financial Condition, \ 897. 

The lease of March 15, 1889, with the Chicago Passenger Ry. 
stipulated that the 2.836 miles horse road of that company con- 
verted into cable road was to be paid for by the West Chicago St. 
R. R. Co. The contract price paid the U. S. Construction Com- 
pany for converting the road was $164,723.65 per mile, or $466,- 
056.28, and this amount should be transferred in the above sum- 
mary from the Chicago Passenger Ry. account to that of the West 



148 MUNICIPAL AFFAIRS. 

Chicago St. R. R., leaving the cost value $273,547.60 to stand, as 
it is, in the second column, since the improvement accrues to the 
first named company. 

The $5,100,000 representing the 6,251 shares of the Chicago 
West Division Ry. Co. and the $5,000,000 paid for negotiating the 
lease of that company should likewise be transferred in the sum- 
mary from the Chicago West Division Ry. account to that of the 
West Chicago St. R. R. 

There should also be taken into account the settlement by 
arbitration May 9, 1896, between the Chicago Passenger Ry. Co. 
and its lessee, by the terms of which the former company wa^ 
charged with $250,000 as its proportion of the Western Ave. elec- 
tric power house, and the fact that that company actually paid to 
the lessee company $891,534.75, part of which was on account of 
the award mentioned, although the improvement was actually to 
the property of the Chicago West Division Ry. Co. 

With the changes noted a new summary would be as follows : 

SUMMARY NO. 2. 

Expenditures. Cost value assets. Appreciation. 

Chicago Passenger Railway $49,158.49 $859,503.18 $810,344.69 

Depreciation. 
Chicago West Division Railway 4,869,098.38 3,872,028.56 007,969.82 

West Chicago Street Railroad.. 23,804,936.51 11,585,607.60 12,219,328.91 



Total $28,724,09338 $16,317,139.34 $12,406,954.04 

It will be remembered that at the time of the lease of the 
balance in the hands of the West Chicago St. R. R. Co. on Decem- 
ber 31, 1897, the sum will represent the total book-value of the 
assets of that company on the date mentioned. 

If to the total of the first column is added the $353,972.19 cash 
Chicago Passenger Ry. there was turned over to the West Chi. St , 
R. R. Co. real estate and buildings representing a cost value of 
$661,202.99, and subsequently another piece of property costing 
$100,000, making a total of $761,202.99, representing real estate 
and buildings, still in the possession of the lessee company Decem- 
ber 31, 1897. 

There was also transferred 29.79 miles single track horse road, 
representing a cost value of $709,767.01, of which 2.38 miles only, 
representing a cost value of $56,705.12, remained on December 
31, 1897. 



CHICAGO STREET RAILWAYS. 149 

There was also 98.45 miles single track horse road of the Chi- 
cago West Division Ry. transferred at the date of the lease of that 
road by the West Chicago St. R. R. Co., of which 6.26 miles, repre- 
senting a cost value of $123,046.43, remained in existence Decem- 
ber 31, 1897. 

The real estate and buildings of the Chicago West Division 
Ry. Co. existing at the date of the lease, and still in the possession 
of the West Chicago St. R. R. Co. on December 31, 1897, repre- 
sented a cost value of $449,158.73 and $927,984 respectively. In 
the subsequent conversion of part of the old horse road into trolley 
road, 7.97 miles of granite pavement, 16.603 miles wood and 44.107 
miles of cobble pavement, representing an aggregate cost value of 
$411,495.93, was relaid and now forms part of the present trolley 
road. 

If these items were incorporated into the above summary they 
would produce the following result, viz: 

SUMMARY NO. 3. 

Book ralue assets. Cost value. Depreciation. 

Chicago Passenger Railway $49,158.49 $1,677,411.29 $1,628,252.80 

Chicago West Division Railway. 4,869,998.38 5*783,713.65 913,715.27 

West Chicago Street Railroad. . 24,158,008.70 11,585,607.60 12,573,301.10 

Totals $29,078,065.57 $19,046,732.54 $10,031,333.03 

The cost value of the assets of the two lessor companies are 
apparently in excess of the book value, according to the last sum- 
mary, but this is because the first column shows the liabilities of 
these companies to the West Chicago St. R. R. Co. only, whereas, 
if the remaining liabilities are considered, the result would be as 
follows : 

SUMMARY NO. 4. 

Total Cost value of 

Liabilities. Properties. Deficit. 

Chicago Passenger Railway $3,123,458.49 $1,677,411.29 $1,446,047.20 

Chicago West Division Railway. 10,189,998.38 5,783,713.65 4,406,284.73 

West Chicago Street Railroad. . 28,358,252.67 11,585,607.60 16,772,645.07 

Totals . : $41,671,709.54 $19,046,732.54 $22,624,977.00 

The liabilities in detail are as follows: 

Chi. Pass. €hi. W. Div. W. Chi. St 

Ry. Co. Ry. Co. R. R. Co. 

Capital stock $1,340,300.00 $1,250,000.00 $13,189,000.00 

First mortgage bonds 400,000.00 4,070,000.00 3,069,000.00 

Cofwol mortgage bonds 1,334,000.00 6,031,000.00 



150 MUNICIPAL AFFAIRS. 

Certificates of Ind. : 

June I, 1891 $2,000.00 

December 1, 1891 3,000.00 

December 1, 1894 3,937,000.00 

Due W. Chicago St. Railroad. . 49,158.49 4,869,998.38 

Miscellaneous 1,227,252.67 



Totals $3,123,458.49 $10,189,998.38 $28,358,252.67 

It will be noticed that the bonded indebtedness of the Chicago 
Passenger Ry. Co. and of the West Chicago Street R. R. Co. is 
greater than the value of the property mortgaged to secure its pay- 
ment, and that while the cost value of the property of the Chicago 
West Division Ry. Co. is $1,713,713.65 in excess of the bonded 
indebtedness of that company, this excess falls $3,156,284.73 short 
of being sufficient to liquidate the claim of the West Chicago St. 
R. R. Co. for $4,869,998.38 expended for betterments to the prop- 
erty of the Chicago West Division Ry. Co. It will also be noticed 
that the assets of neither of the three roads are sufficient to pay 
their bonded and floating indebtedness and leave any residue for 
the redemption of the capital stock, as will be seen by the following 
statement : 

Bonds and float- Cost value of 

ing debt. property. Deficit. 

Chicago Passenger Ry. Co $1,783,158.49 $1,677,411.29 $105,747.20 

Chicago West Division Railway 8,939,998.38 5,783,713-65 3,156,284.73 

West Chicago Street Railroad. . 15,169,252.67 13,299,321.25 1,869,931.42 

Totals $25,892,409.54 $20,760,446.19 $5,131,963.35 

Add to this the capital stock and we have the total deficit as 

follows : 

Deficit as above. Capital stock. Total deficit. 

Chicago Passenger Ry. Co $105,747.20 $1,340,300.00 $1,446,047.20 

Chicago West Division Railway. 3,156,284.73 1,250,000.00 4,406,284.73 

West Chicago Street Railroad. . 1,869,931.42 13,189,000.00 15,058,931.42 

Totals $5,131,96335 $15,779,300.00 $20,911,263.35 

Sec. JO. — Cost of Cable Construction. 
As already fully explained on a preceding page, it has been 
necessary to estimate the detailed cost of the original cable system, 
built under contract by the U. S. Construction Co., in order to com- 
plete the foregoing summary, and as the cost thus incorporated is 
not conclusive, and at best only approximates the actual cost, it 
may not be out of place to submit for consideration at this time 
the following facts upon which the estimate in detail is based : 



CHICAGO STREET RAILWAYS. 151 

The lease of October 20, 1887, provided for the construction 
of "at least 17 miles" of fully equipped and operative cable road, 
with all the necessary power houses, machinery and equipment. 
The books of the West Chicago St. R. R. Co. show that $4,000,000 
was paid to the U. S. Construction Co. for the system complete, 
and the payment is represented in the books by the single entry of 
that amount to the debit of construction account. No details are 
given in the books, nor have I been able to find on file any schedule 
of any character from which to make up a list of the property trans- 
ferred and its cost value, either in detail or bulk. 1 At the same 
time, such estimates as have been incorporated into this report are 
approximately correct, and, therefore, do not detract materially 
from the value of the report itself. 

In one sense these estimates are preferable to the records 
themselves, as the singular fact is presented of Mr. Yerkes dis- 
puting the official records of his- own company. In other words, 
the records show that $4,000,000 was paid to the U. S. Construc- 
tion Co. for the original West Side cable system, whereas Mr. 
Yerkes states that the actual cost was $7,800,000. Where authori- 
ties disagree in this manner, estimates are not only permissible but 
necessary. 

From the records of the engineers' department, I learn that 
the U. S. Construction Co. built 17.47 miles single track cable road, 
and from other sources I find that three power houses, with neces- 
sary machinery, were also built by that company. Finally, if it is 
assumed that all the grip cars now in use on the Madison St. and 
Milwaukee Ave. cable system, or a like number, were originally 
built by the U. S. Construction Co., practically all the construction 
work done by that company will be covered. 

Subsequently, and without the intermediation of any construc- 
tion company, the West Chicago St. R. R. Co. built the Blue 
Island Ave., Halsted and Van Buren St. cable system, the detailed 

1 The absence of any such record does not necessarily imply any irregularity 
in the accounts of the West Chicago Street Railroad Company, as such details, under 
the circumstances, would naturally be found only in the books of the U. S. Con- 
struction Company, but, as access to these books has been denied, or rather their 
whereabouts stated to be unknown, and as the information which they contain is 
absolutely essential to a correct and perfect understanding of the situation, no 
option is presented but to supply any deficiency in figures with well considered esti- 
mates, or else abandon any attempt to arrive at a satisfactory conclusion altogether. 



152 MUNICIPAL AFFAIRS. 

cost of which is clearly set forth in the books of account of that 
company. 

A comparison of the mileage of the two systems referred to 
shows that 40 per cent, of the total cable lines on the West Side 
compose the Blue Island Ave., Halsted and Van Buren St. system. 
This system is operated by two power houses, the cost of which, 
including machinery, was $665,484.94. 

Assuming that the same ratio of power to mileage is required 
on the section built by the U. S. Construction Co. as on the section 
built by the West Chicago St. R. R. Co. itself, and that a corre- 
sponding ratio obtains in the relative cost of the power plants, the 
cost of the three power houses and machinery built by the U. S. 
Construction Co. would be approximately $998,277.81, exclusive of 
the land, which, under the contract, was to be provided by the 
R. R. Co. 

There is good reason to believe that this is a high estimate 
and that the actual cost was much less, as a brief description of the 
several power houses will show. 

In the Washington street power house are "two simple, non-condensing engines, 
36x60 inches, 1,000 horse power each," to quote from a semi-official publication of 
the company. One of these engines is held in reserve, while the other operates the 
Washington street tunnel and State street loop cable. 

In the Milwaukee avenue power house are two Corliss engines, 36x72, 1,000 
horse power each. Two 20 feet diameter fly wheels, weighing 75,000 pounds each. 
One of the engines is held in reserve, as in the Washington street power house. 

In the Rockwell street power house are two engines, 1,400 horse power each. 
The same publication referred to above speaks of these three power houses as fol- 
lows : "The three power houses mentioned above, having been built at the same 
time, are very similar in design ; the one at Rockwell street is almost an exact dupli- 
cate of the Milwaukee avenue plant." 

In another place this publication refers to the Blue Island avenue power plant, 
calling particular attention to the fact that "the part of the building where the 
machinery is located is 116x100 feet," and that "the site was an extremely difficult 
one on which to erect a heavy building. Quick-sand was encountered and the exca- 
vations for the foundations had to be extended 40 feet below the surface of the 
street. Eight hundred thousand brick, laid in Portland cement, were used in the 
engine foundations alone. The station is one of the most complete cable plants 
ever built, and embodies all the improvements that had been made in the other 
Chicago cable power houses, as well as those of San Francisco, Philadelphia, etc** 

Three cables are operated from this power house by "two Allis engines, 40x72 
inches each, being rated at 1,800 horse power under steam pressure of 100 pounds. 
The fly wheels are 24 feet in diameter and weigh 100,000 pounds each." 

The Van Buren street power house is rated second to the Blue Island avenue 
power house by the same publication, having two Allis engines 30x60 inches each, 



CHICAGO STREET RAILWAYS. 153 

1,300 horse power, fly wheels weighing 100,000 pounds each and measuring 20 feet 
in diameter. 

It is more than probable that the cost of the last two power 
houses, viz: $665,484.94, equalled the cost of the other three; the 
estimate of $998,277.81, however, is consistent with the mileage 
operated, and does no injustice to the company in an effort to estab- 
lish the first cost of the original cable plant, since the accounts giv- 
ing the actual cost are not produced. 

The electric plant for the Washington St. tunnel is situated in 
the Washington St. power house and included in the estimated cost 
of that structure. No material improvements were made to the 
tunnel proper by the U. S. Construction Co., beyond the paving 
and laying of the cable track, all of which cost is included in the 
cost of the general mileage of 17.47 miles single track cable built 
by the Construction Co. The actual reconstruction of the tunnel 
was done in 1892 and 1893, and cost $28,752.96, which was paid for 
by the Chicago Passenger Ry. Co. independent of the original con- 
struction contract of November 17, 1887. 

There remains only to estimate the equipment furnished by 
the U. S. Construction Co. to complete the expenditures made by 
that company under the construction contract. Of the 258 grip 
cars now owned by the West Chicago St. R. R. Co., 40 per cent, 
are doubtless required for the Blue Island Ave. and Van Buren St. 
system, leaving 155 for the Madison St. and Milwaukee Ave. lines. 
The cost of grip cars on the Chicago City Ry. Co. in 1882, was 
$836.58 each, and in 1888 $819.71 each. Assuming the cost in 1890 
to have been $800, and that all the grip cars now operated by the 
Madison St. and Milwaukee Ave. systems, or a like number, were 
built by the U. S. Construction Co., the cost of 155 would be 
$124,000. 

It is fair to assume that no passenger cars were furnished by 

the U. S. Construction Co., as I find a charge on the books of the 
company of $174,188.92 for that purpose; $16,539.20 in 1888, $49,- 
976.71 in 1889, and $107,673.01 in 1890, which, on an average of 
$731 for open cars and $1,055 f° r closed cars, would provide 200 
new cars, in addition to the 793 cars received from the Chicago 
West Division Ry. Co. In 1891, $57,789.77 was paid out for new 
cars, and in 1892 $345,630.60, all independent of any cars that may 
have been furnished by the U. S. Construction Co. 



154 MUNICIPAL AFFAIRS. 

Comparing the mileage and traffic of the company to-day and 
its 1,865 cars with the mileage and traffic in 1890, the 993 cars ac- 
counted for above were amply sufficient to operate the road at that 
time. 

Deducting the estimated cost of the power house and machin- 
ery and equipment ($1,122,277.81) from the total $4,000,000 paid 
under the contract, leaves $2,877,722.19 to cover the cost of the 
17.47 miles single track cable road built, which would be at the 
rate of $164,723.65 per mile. That this is greatly in excess of the 
cost actually incurred by the U. S. Construction Co. may be in- 
ferred from several facts that are clearly established by the records 
of the several companies. 

(1) The actual cost of the 17.898 miles of cable road on the 
South Side, north of 39th St., including the down-town loop, was 
$1,470,868.27, or at the rate of $82,180.60 per mile. 

(2) Six miles of single track cable road extension subse- 
quently built on State St. south of 39th St. cost $330,042.82, or at 
the rate of $55,006.80 per mile, and 9.687 miles single track cable 
extension south on Cottage Grove Ave. cost $575,408.63, or $59,- 
400.09 per mile. 

(3) The actual cost of the 1 1.655 miles single track cable 
road constituting the Blue Island Ave., Halsted and Van Buren St. 
line, including the Adams St. loop, was $1,124,188.06, or at the rate 
of $96,455.43 per mile, according to the books of the West Chicago 
St. R. R. Co. 

(4) The State St. loop extension of the West Chicago St. 
R. R. Co. cost $88,405.56, or at the rate of $139,221.37 per mile, and 
the cost of the 0.667 mile single track cable road built by the 
Chicago City Ry. Co. in the construction of its new loop on Mich- 
igan Ave. was $57,025.71, or at the rate of $85,495.82 per mile. 

(5) The contract price for the construction of tb<s 4.459 miles 
single track cable road on Clybourne Ave. from the terrnius near 
Fullerton Ave. to Division St., and on Division St. to the junction 
with the cable line on Wells St., at that point, including an under- 
ground conduit from that point continuing on Division St. to North 
Clark St., and thence South, connecting with the power house on 
North Clark St., was $500,000. Making no allowance for the 4,000 
lineal feet of cable conduit, but apportioning the entire sum to the 



CHICAGO STREET RAILWAYS. 155 

4.459 miles single track cable road, makes the average cost per 
mile $112,132.77.- This contract was taken by the U. S. Construc- 
tion Co. 

If a comparison of the cost of the different sections of cable 
road referred to above does not prove conclusively that the actual 
cost of the 17.47 miles single track cable road built by the U. S. 
Construction Co. for the West Chicago St. R. R. Co. was less than 
$164,723.65 per mile, the contract price, it at least shows that the 
cost was not %6 i 6yy,y22.ig i or $382,240 per mile single track, which 
would be the rate per mile if $7,800,000 was the actual cost of the 
system, according to Mr. Yerkes. 

To show more clearly the extreme improbability that $382,240 
was the actual cost per mile, it is only necessary to call attention 
to the fact that at that rate one average mile of cable road on the 
West Side cost $52,197.18 more than the six miles of cable road on 
State St. South of 39th St. ; more than six times as much per mile 
as the cable road on Cottage Grove Ave. south of 39th St. ; nearly 
five times as much per mile as the first experimental section of 
cable road built in Chicago, with all the subsequent expenditures 
for changes and improvements to bring it up to its present degree 
of efficiency ; more than four times as much per mile as a road of a 
precisely similar character built according to the same specifica- 
tions by the West Chicago St. R. R. Co. itself; $100,000 per mile 
more than the State St. loop extension built by the same company ; 
and nearly five times as much per mile as the Michigan Ave. loop 
extension of the Wabash Ave. line, both of which extensions, be- 
cause of their location in the business district, where the sewer, gas 
and water pipe obstructions are the greatest, show a cost of con- 
struction much greater than in outlying sections of the city ; finally, 
$82,000 per mile more than the contract price with the same Con- 
struction Company for the construction of the entire cable system 
on the North Side, including all power houses and machinery, the 
construction of the Wells St. and Clark St. bridges, and the recon- 
struction of the Dearborn St. bridge and La Salle St. tunnel, etc., 
etc. 1 

1 Reference might also be made to the following answer of the West Chicago 
Street Railroad Company to an inquiry of the Civic Federation as to the cost per 
mile of their cable road, to-wit: "Estimated cost per mile of track (cable), includ- 
ing rails, conduits, pulleys, vaults, and necessary machinery for operating the same, 
$75,000 single track." 



156 MUNICIPAL AFFAIRS. 

Of the entire 17.47 miles single track cable road built by the 
U. S. Construction Co. only 1.23 miles were West Chicago St. R. R. 
Co. mileage, the balance being 2.836 miles Chicago Passenger Ry. 
Co. and 13.404 miles Chicago West Division Ry. Co. 

Sec. II* — Construction Charges in Detail. 
The total charges to construction account between October 
20, 1887, and December 31, 1894, or prior to the introduction of 
the trolley system, aggregated $7,002,390.87, divided as follows: 
17.47 miles single track original cable system, including buildings, ma- 
chinery, equipment, etc., built by U. S. Construction Company, 
$4,000,000, divided as follows : 

13.404 miles Chicago West Division Railway Company. $2,207,955.82 

2.836 miles Chicago Passenger Railway Company 466,056.28 

1.230 miles West Chicago Street Railroad Company 203,710.09 

17.470 miles. Total at $164,723.65 $2,877,722.19 

Three power houses and machinery 998,277.81 

155 grip cars 124,000.00 

Total $4,000,000.00 

As already explained the agreement of March 15, 1889, with 
the Chicago Passenger Ry. Co. stipulates that the cost of convert- 
ing the 2.836 miles old horse track of the Chicago Passenger Ry. 
Co. into cable road was to be paid by the West Chicago St. R. R. 
Co., so that of the total $4,000,000 paid to the U. S. Construction 
Co. under the original cable contract $1,792,044.18 was chargeable 
to the West Chicago St. R. R. Co. and $2,207,955.82 to the Chicago 
West Division Ry. Co. 

Taken in connection with their answer to a more general inquiry as to the cost 
of all building and equipping of new lines and extension, to-wit : "It is impossible 
to give statement as asked for itemized, as the construction and equipping of new 
lines has been charged to the general construction account," would seem to indicate 
that the officials of the West Chicago Street Railroad Company have apparently no 
clearly defined idea themselves as to the actual cost value of their property, or at 
least have not yet fully determined upon a uniform answer to all inquiries. 

Their estimate of $75,000 per mile for cable road, while more reasonable than the 
contract price of $164,723.65 or the price indirectly stated by Mr. Yerkes, $382,240, 
is unreliable and of no more value than their estimate of the average cost of trolley 
road, to-wit: "Estimated cost per mile of track (electric), including rail construc- 
tion, bonding, poles, and all necessary wiring, together with a complete feeder system 
and necessary underground electric conduits, $50,000 single track," as the books 
themselves show that the cost to construct the latter kind of road is less than half 
their estimate. Elsewhere in this report reasons are fully set forth why the actual 
cost per mile single track of the Blue Island avenue and Halsted street and Van 
Buren street lines, to-wit: $96,455.43, should be accepted as a safe estimate of the 
cost of the Madison street and Milwaukee avenue cable lines, and that amount has 
been adopted as the approximate cost per mile of the cable road, built by the U. S. 
Construction Company, in preparing the final schedule of the cost value of the 
existing property of the company. 



CHICAGO STREET RAILWAYS. 157 

Subsequently 0.635 m ^ e single track cable road was built at 
a cost of $88,405.56, or at the rate of $139,221.27 per mile, and 
11.655 miles single track at a cost of $1,124,188.06, or at the rate of 
$96,455.43 per mile, and charged as follows: 

0.314 mile Chicago Passenger Railway Company $43,715-51 

0.321 mile Chicago West Division Railway Company 44,690.05 

11.655 miles Chicago West Division Railway Company 1,124,188.06 

Total $1,212,593.62 

56.676 miles single track horse road was also built as follows : 

4.396 miles Chicago Passenger Railway Company $104,737.66 

1.96 miles Chicago West Division Railway Company 46,698.51 

50.32 miles West Chicago Street Railroad Company 1,132,178.36 

Total $1,283,614.53 

During the same period there was also charged into construc- 
tion account, as already stated, the following items : 

Taylor street bridge $100,000.00 

Taylor street viaduct 7,654.55 

Halsted and Kedzie street viaducts 2,427.88 

Ogden avenue 7,861.90 

Madison street new steel rails and asphalt 52,376.18 

Franchise petitions 207,321.37 

Interest and discount on bonds 128,540.84 

Total $506,182.72 

To recapitulate, the $7,002,390.87 charged to construction ac- 
count between October 20, 1887, and December 31, 1894, as stated 
above in detail, was on the following accounts : 

Chicago Passenger Railway Company $148,453.17 

Chicago West Division Railway Company 3,423,532.44 

West Chicago Street Railroad Company 3,430,405.26 

Total $7,002,300.87 

Subsequently there was charged to construction account $2,- 
605,296.60 on account of the construction of 173.555 miles single 
track electric roads, including the conversion of old horse roads 

into electric roads, as follows: 

2.01 miles Chicago Passenger Railway Company at $24,204.17... $48,650.00 
26.575 miles Chicago Passenger Railway Company at $18,573.46... 493,589.00 

28.585 miles total Chicago Passenger Railway $542,240.00 

25.970 miles West Chicago Street Railroad Company at $18,573.46 

(estimated) 482,352.00 

54-555 miles total new electric road $1,024,592.00 

119.00 miles single track horse road converted into electric 
road at $11,985.48 per mile, $1,426,272.49, divided as follows: 



158 MUNICIPAL AFFAIRS. 

68.68 miles Chicago West Division Railway Company $825,163.04 

50.32 miles West Chicago Street Railroad Company 601,109.45 

119. miles. Total $1,426,272.49 

Into the same account was also charged $154,431.28 for inter* 

est and discount on bonds. 

Following is a summary of the total charges to construction 

account down to December 31, 1897: 

Account Chicago Passenger Railway Company $690,693.24 

Account Chicago West Division Railway Company 4,248,695.48 

Account West Chicago Street Railroad Company 4,668,298.75 

Total $9,607,687.47 

It will be noticed that of the total expenditures to Decembei 
31, 1897, it has been necessary to estimate only the cost of 25.970 
miles of new trolley road built for the Chicago West Division Ry. 
Co. The basis for this estimate is the rate per mile for road of a 
precisely similar character built in the same year for the Chicago 
Passenger Ry. Co. and made the subject of arbitration, as fully 
set forth elsewhere in this report. 

Deducting the amount named in this report of the arbitrators 
as chargeable to the Chicago Passenger Ry., to-wit: $542,240.07, 
and the amount estimated above for the 25.970 miles of road 
chargeable to the Chicago West Division Ry. Co., also the item of 
$154,431.28 for interest on bonds, leaves a balance of $1,426,272.49 
out of the total $2,605,296.60, to cover the cost of converting 119 
miles of horse road into trolley, which would be at the rate of $11,- 
985.48 per mile. 

As this rate is approximately the cost per mile of similar roads 
on the North and South side lines, exclusive of paving, it is assumed 
that in the conversion of the 1 19 miles of horse road mentioned the 
old pavement already down was allowed to remain, and thus its 
original cost value became incorporated into the total cost value 
of the complete trolley road of the present day, and showing the 
cost of the West Side trolley road as follows: 

2.01 miles single track at $24,204.17 $48,650.39 

26.575 miles single track at 18,573.46 493,589,68 

68.68 miles single track at 18,006.10 1,236,658.97 

25.97 miles single track at 18,573.46 482,352.76 

50.32 miles single track at 17,148.08 862,891.20 

173-555 miles, average at $18,000.88 $3,124,143.00 



CHICAGO STREET RAILWAYS. 159 

Sec* J2« — Mileage of West Side Lines. 
Chicago Passenger Railway — Miles, S. T. 
Horse road at date of lease, November 16, 1888 29.79 

New horse road built by West Chicago Street Railroad Company for 
account of Chicago Passenger Railway Company since lease, Novem- 
ber 16, 1888 4.40 

Chicago West Division Railway — 

Horse road at date of lease, October 20, 1887 98.45 

New horse road built by West Chicago Street Railroad Company for ac- 
count of Chicago West Division Railway since lease, October 20, 1887. 1.96 

West Chicago Street Railroad — 

New horse road, built since lease, October 20, 1887 50.32 

New cable road 1.23 

New electric road 25.97 

Total 212.12 

Since the lease of October 20, 1887, the following changes 

have been made in the character of the roads included in the above 

mileage, viz: 

Chicago Passenger Railway — Miles, S. T. 

Original horse road 29.79 

Converted into cable road 3.15 

Converted into electric road 24.185 

Transferred to Chicago City Railway, Madison to Washington streets 

on Michigan avenue 0.075 

Horse road still remaining 2.38 

Chicago West Division Railway — 

Original horse road 98.45 

Converted to cable roads 25.38 

Converted to electric roads 66.77 

Transferred to Chicago City Railway, to State on Lake (450 ft.) 

Horse road still remaining 6.26 

West Chicago Street Railroad Company — 

New horse road, built since the lease of October 20, 1887 and afterward 

converted into electric road 50.32 

New horse road built for account of West Division Railway since lease, 

October 20, 1887, afterward converted into electric road 1.96 

New horse road built for account of Chicago Passenger Railway since 

lease, October 20, 1887, afterward converted into electric road 4.40 

Add new cable road built 1.23 

Add new electric road built 25.97 

Total 406.190 

If from the above totals is deducted the 860 feet of single track road trans- 
ferred to the Chicago City Railway and to the remainder is added 457 feet of 
double track or 914 feet of single track road acquired from the North Chicago 
Street Railroad and already referred to in the exhibit as forming part of the exist- 
ing mileage of the West Chicago Street Railroad the remainder will be 1,120,044.2 
feet, or 212.13 miles, single track, distributed as follows : 



160 MUNICIPAL AFFAIRS. 

Feet single track. Miles single track. 

Cable road 157,131. 29.76 

Electric road 917,291.6 173-73 

Horse road 45,621.6 8.64 

Total 1,120,044.2 212.13 

Van Buren street tunnel 3,306.9 .63 

I,i3i,35i-I 212.76 

The electric line from Armitage avenue to Logan Square, on Milwaukee avenue 
(5,684 feet double track), was built by the West Chicago Street Railroad Company, 
but is now being operated by the North Chicago Electric Railway Company and is 
therefore not included in the above mileage. The 3,309.9 feet of track of Van 
Buren street tunnel, although built by the Tunnel Company, is practically a part of 
the West Chicago Street Railroad Company and is therefore included. Four hun- 
dred and fifty-seven feet of double track on Fifth avenue, from Lake street to 
Randolph street, is included in the above mileage, although originally built by the 
North Chicago Street Railroad Company. 



7 1S08 



